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Grand Committee

Monday, 21 November 2011

Arrangement of Business

Announcement

3.30 pm

The Deputy Chairman of Committees (Baroness McIntosh of Hudnall): My Lords, I remind the Committee that if there is a Division in the Chamber, the Committee will adjourn for 10 minutes from the sound of the Division Bell for Members of the Committee to vote.

"(3) Regulations shall prescribe the considerations to be taken into account in deciding whether a fixed-term award would be appropriate."

Lord Touhig: My Lords, Amendments 86F and 86G in my name, that of my noble friend Lady Healy of Primrose Hill and those of my good colleagues, the noble Lord, Lord Wigley, and the noble Baroness, Lady Gardner of Parkes, are intended to make it clear that indefinite awards could and should be made for people with lifelong conditions or disabilities of a degenerative nature. Such awards should be based on evidence from healthcare professionals showing that the needs of the person receiving the award will remain the same or increase over time, and that they will therefore continue to meet the eligibility criteria for the benefit indefinitely.

The Government have stated an intention to make the personal independence payment awards for a fixed term, except in exceptional circumstances. In addition, the Government's proposal is that there will be an in-built review process for all awards to ensure that they remain accurate. This proposal is based on the assumption that most individuals will show some improvement or will be able to adapt to their condition over time to the extent that their needs will lessen.

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However, this is simply not the case for those with long-term conditions. There are around 300,000 adults in England with autism, which is a lifelong condition. While some people with autism may develop the ability to manage aspects of their disability, such as improving verbal communication or overcoming an inability to travel by learning a specific route, such positive change happens only as a result of support, including the present disability living allowance. If that is taken away, progress risks being reversed.

I am not arguing that people should be granted indefinite awards solely on the basis of their diagnosis. However, if medical and social care assessment evidence for the individual claimant indicates that theirs is a lifelong condition that is unlikely to improve, this should be taken into account to indicate that an indefinite award may be appropriate. It is important that this is prescribed in regulation. Reassessing all claimants with long-term and degenerative conditions not only wastes taxpayers' money but can cause significant stress for claimants, especially those with autism, who often have additional mental health problems. The increased anxiety can lead to deterioration in the claimant's health, thereby undermining the Government's purpose and the rationale of enhancing the independence of disabled people-to which we all subscribe.

Our amendments before your Lordships this afternoon would allow for lifelong awards where there is evidence to show that the individual's condition is unlikely to change over time. In our debate last Monday I said that, so far as understanding autism is required, the condition can be summed up in four words: autism is for life. Where it is established that a person with autism should receive the personal independence payment, it, too, should be for life. I beg to move.

Lord Wigley: My Lords, I rise to speak very briefly in support of these amendments so ably moved by the noble Lord, Lord Touhig. Many of the arguments that underpin these amendments have already been rehearsed in the previous debate, so I will not take too much time.

It seems sensible to have an equal-handed approach to these circumstances. If someone has a condition that is palpably for life, the guidance should be that the benefit should run for life. Equally, in those circumstances where there may be doubt, there needs to be flexibility. What is needed, perhaps on the face of the Bill as these amendments propose, is that there are guidelines that take those two sets of circumstances properly into account. The system itself must be willing to respond to the individual circumstances rather than just follow a dogma about restricting benefits even where benefits are probably much needed.

Lord Skelmersdale: My Lords, I am not sure whether I ought to declare an interest, but I will do so nevertheless. My daughter is a research biochemist at the University of Sheffield where she works in a cancer laboratory. Her objective, as it currently stands, is to starve cancer cells of blood-something that other researchers around the country, and indeed around the world, are currently working on without yet having achieved a satisfactory result.

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Although I readily understand why the noble Lord, Lord Touhig, has moved his amendment, I find the amendment, although this might be unfair, perhaps-to make up a word-a little closed mind-ish. There is no doubt that, over recent years, the medical fraternity has made leaps and bounds in research. There is even, as I understand it, a possibility that stem cells could be used to repair the nerve system up the back. Now, such developments may come up in five, 20 or 50 years- I do not know, and nobody knows-but an amendment like this is so restrictive that it rather ignores the possibilities of medical science.

I readily understand the interest of the noble Lord, Lord Touhig, in mental health, particularly autism. I confess that I do not know anything about autism, whereas clearly he does. It is not beyond the wit of man to believe that some better treatment, understanding or social environment in respect of any mental disease could well improve matters to allow people a certain amount of, for example, work. My son-in-law suffers from ME, and apparently there is tremendous argument as to whether ME is entirely a mental disease or a physical disease with mental attributes. I do not know whether he will recover enough to work; I suspect that neither he nor anyone else knows that. However, I find this particular amendment-especially the second one-somewhat restrictive.

The Countess of Mar: My Lords, I support the noble Lord, Lord Touhig, in his amendment. I respect the view of the noble Lord, Lord Skelmersdale, on ME, and I also thank the Minister for his recent letter to me that clarifies a lot about the department's stance on ME. I am very grateful for what he has done.

However, there are serious cases of ME where people are just not going to get better. In the House the other day during our consideration of the Health and Social Care Bill, I described a young lady who has had ME since she was 15 and who is now 30 and is not going to get any better. There are a lot of people like that. She is suffering terrible stress with worrying about what is going to happen with her personal independence payments, and that is not helping her condition. In cases like that, where it is pretty obvious that the person is not going to get better-unless there is a miracle of medical science, when of course it should be reviewed whether the person's health can be improved, which would be all well and good-such patients should not be subjected to the stresses of a medical examination.

Lord McAvoy: My Lords, I would like to follow the point made by the noble Lord, Lord Skelmersdale, that medical science might come up with a cure, but I am puzzled as to why that is problem. Surely when the facts change, the law would be changed; I do not see any great problem with changing the law.

Lord McKenzie of Luton: My Lords, we have a degree of sympathy with the amendment moved by my noble friend Lord Touhig and spoken to by the noble Countess, Lady Mar, and the noble Lord, Lord Wigley. As I understand it, it goes with the grain of what the Government are seeking to do. When we debated similar issues last week, I thought the term

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"exceptional circumstances" was somewhat broader than a strict reading of it might lead one to conclude. Therefore, I ask the Minister to expand on that when dealing with this amendment and to say whether he accepts the proposition that there will be those with long-term degenerative conditions that are unlikely to improve.

The noble Lord, Lord Skelmersdale, makes the reasonable point that we never know if there might be medical scientific breakthroughs, but, as my noble friend said, these matters could always be revisited. It seems to be important to try to give some comfort to people whose condition is sadly not going to improve. What is the purpose of bringing them in simply to pile stress on to their lives and use resources that could be deployed elsewhere?

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud): My Lords, we think it is right that an individual's benefit entitlement is based on the degree to which he or she is participating in society. This level of participation can vary as health conditions or impairments improve or deteriorate, their impact changes or individuals adapt to their circumstances. We want the benefit accurately to reflect relevant changes in circumstances to ensure that people receive the right level of support. The 2004-05 national benefit review found that about £630 million a year of DLA is overpaid as a result of unreported changes in circumstances. This cannot be right. However, it is equally about ensuring that, when people's circumstances deteriorate, the benefit keeps track with them.

The same study estimated that around £190 million of DLA is underpaid each year-vital money that is not reaching the people for whom it was intended. There is no one-size-fits-all answer; our approach will involve a combination of awards that, in some cases, will be fixed for a short time and in others will be longer term, depending on the individual, the impact of their disability and the extent to which they are able to live independently. In many circumstances, this can change for better or indeed for worse during someone's lifetime, and this will be different for different people. We think that an active management regime that involves planned reviews is the most appropriate way of responding to this.

However, it is important-and on this I feel we agree-that we do not undertake inappropriate or unnecessary assessments and interventions where there is unlikely to be a change in award. Key to this is ensuring that decisions on award duration and interventions are evidence based. Here I refer back to comments I made during the debate on the noble Lord's previous amendments. In PIP assessment, we want to get the best mix of evidence from a variety of sources. This will be partly about what the claimants tell us about themselves, partly what can be gathered at face-to-face consultations and partly what we can obtain from relevant people who support them. Moreover, as I said, we want individuals to tell us who is best placed to advise us on these matters.

Therefore, I think we are fundamentally in the same place as the noble Lords and the noble Baroness. The one key difference is that we do not think that an individual's type of health condition or impairment

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matters-for example, whether or not it is a lifelong condition; what matters is the likely impact of the condition going forwards and whether it is likely to affect benefit entitlement. Conditions and impairments-even ones that are usually degenerative-can affect people in very different ways. That is why we want decisions on award durations to be based on individual circumstances following consideration of all the evidence of the case.

Lord Wigley: The Minister said a moment ago that he was looking for the maximum degree of flexibility and not to have reviews where they were patently not necessary. Am I right in recalling that in the earlier debates he indicated that the first tier of any review might be with the professionals without impinging on the beneficiary so as not to cause unnecessary worry and that, if the professional-the GP or whoever-advised that there was no change, there would be no need at all for the beneficiary to be aware of this?

3.45 pm

Lord Freud: Yes, my Lords. That is what I said and it has not changed. Noble Lords might be reassured by the fact that, even where awards are fixed term and periodic reassessment is required, this does not have to be burdensome. As I have just said, in some cases the assessments will involve scrutiny of paper evidence only and will not require a face-to-face consultation. This will especially be the case where there is considerable supporting evidence on which to base decisions. Conditions or impairments which are life-long and/or degenerative are particularly likely to have such supporting evidence.

We will provide guidance on the duration of an award, including when an ongoing award would be appropriate and with what frequency that award would be reviewed. We are committed to developing the duration assessment in consultation with disabled people and their representatives to ensure that we get it right. We recognise how important this is to ensure that the process of deciding award durations remains both fair and transparent.

I should also like to tackle a misconception that seems to have built up in relation to this issue-that is, that there will be a requirement for everyone to be reviewed on a yearly basis. This is simply not true. While some people will receive one-year awards where their circumstances warrant it, the vast majority of awards are likely to be longer than this, with some being much longer and some indefinite.

I hope that I have reassured noble Lords that we are in the same place as them on this issue. We want award durations to be based on individuals' circumstances and the likelihood of change; we do not want unnecessary reviews or assessments; and we want decisions on these issues to be based on the best evidence, including that from the professionals involved in supporting claimants. On that basis, I urge the noble Lord to withdraw his amendment.

Lord McKenzie of Luton: Can the Minister clarify one point? He said that some awards might be long- term and some short-term. Can he give us an inkling as to the department's thinking about that spectrum and what long-term awards may mean?

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Lord Freud: My Lords, it would be premature for me to go into much more detail here. Clearly, we are aiming to build up the award duration in consultation, and I would not want to pre-empt that consultative process.

Lord Touhig: My Lords, I thank all noble Lords for their contributions to this very short but useful and important debate. The noble Lord, Lord Wigley, pointed out that we have sought to be flexible in these amendments. I am sorry that the noble Lord, Lord Skelmersdale, thinks that we are being somewhat restrictive. However, that is not the intention; we are trying to be flexible, recognising that there will be circumstances where it will not be appropriate for a lifetime award to be made.

The noble Countess, Lady Mar, made an important point in speaking about someone with experience of an illness that will not improve. Putting someone through all the problems and distress of a review will not be helpful at all. We all hope to God that many of these problems can be solved as time goes on. My noble friend Lord McAvoy made the point that, if what we are asking for were in the Bill and there were some considerable improvement in one area or another, we would obviously need to change the law if that were appropriate. Therefore, I think that we need to be flexible on that.

The Minister made the important point that £630 million had been overpaid in DLA. However, from my experience of sitting on the Public Accounts Committee in the other place, I would say that one really has to look into how that happened. Very often, it was due to failure by the department and not because someone's condition had changed. The National Audit Office reports point this out. Indeed, on one occasion I had a case where a constituent had to complete a form and there was a box to be ticked against the question, "Have you received income support in the past year?". She ticked it and underneath wrote, "But it ceased on X date". However, because the form was scanned in, the department's system could not read the words underneath, so it continued to overpay her and then demanded the money back. I fear that the problem of overpayment is often caused not by the person making the claim but by the system, in any event.

I thank the noble Lord for his clarity on a number of points and for the encouragement that he gave. I feel that can we make progress, as the way that we are working in this Committee and in this House helps us to improve the quality of legislation because of the backgrounds, knowledge and expertise that so many noble Lords have on a whole range of matters. I believe that by collaborating, we will protect those who are perhaps the most vulnerable-certainly, those who concern those of us who tabled this amendment-so that they will not have to go through all the trauma and difficulties associated with constant review of their benefit once it is awarded, if their condition is such that it will not improve. Having said that, I thank the Minister for his comments and I am sure that we will enter into more dialogue about this in future. I beg leave to withdraw the amendment.

Amendment 86F withdrawn.

Amendment 86G not moved.

Clause 85 agreed.

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Clause 86 : Report to Parliament

Amendment 87

Moved by Lord Rix

87: Clause 86, page 60, line 17, at end insert "biennially for the first six years after those sections come into force"

Lord Rix: My Lords, the purpose of this amendment and Amendment 88 would be to introduce a biennial independent review of the personal independence payment for the first six years after it comes into force. The amendments also aim to require the report within two years of PIP being implemented, not the three years as proposed in the Bill. As your Lordships will be aware, the Bill already provides for a single independent review of the PIP assessment, with a report that must be presented to Parliament. While this is welcome, given the impact of the new assessment on many disabled people-particularly those with a learning disability-I believe that more than one review would be necessary.

Indeed, the precedent for having more than one review has already been established. The work capability assessment is subject to an annual independent review for the first five years of its operation, as laid out in the Welfare Reform Act 2007. The experience of the work capability assessment has shown the benefits of an ongoing independent review, although I acknowledge that the yearly requirement has meant insufficient time for the introduction of one review's proposals before the next commences. Hence, I am calling for the PIP review to take place on a biennial basis only. During discussion on this matter in the Commons, it was noted by the Government that the proposed one-off report is just one way of "close working and testing" the implementation of the new measure. However, I am concerned that this does not necessarily guarantee a fully fit-for-purpose assessment.

The independent review of the WCA has shown a process that is not working as it should be. If a similar scenario is revealed for the PIP assessment, the Government should act swiftly to ensure that disabled people are appropriately supported and not denied the assistance they need to live more independently. I believe a biennial review would help to make this happen. Indeed, on a more positive note, if PIP is to be as successful as the Government claim it is going to be, Ministers would then have a valuable opportunity to showcase this in Parliament and more widely across the country, which-in these rather hard-pressed times for the Government on this Bill-must surely be a welcome boost both to the Government and to Ministers. I beg to move.

Lord Freud My Lords, perhaps I may be permitted to make an early intervention here in order to offer to take this matter away and return on Report. The Government fully agree with noble Lords on the need for robust independent evaluation of how the assessment works in practice and of the value that Professor Harrington has added through his reviews of the work capability assessment. While we had not intended legislating for multiple reviews of PIP, we are not

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averse to them. Given the strength of opinion that I know exists on this issue, I will take it away to see what I can do before Report. Although I cannot promise here and now that I can agree to exactly the formulation in these amendments, I will do all that I can to satisfy noble Lords on this matter.

I hope that this statement also deals with my noble friend Lord German's concern, which I believe may lie behind his Amendments 98ZA and 98ZB. Given this assurance, I urge noble Lords to withdraw their amendments.

Lord Wigley: My Lords, as my fire has been taken away from me by the Minister, perhaps I may at least be allowed to say thank you. In consideration of this matter-and obviously consideration can come to a positive outcome, but not necessarily-the one initial fact that I would ask the Minister to take on board is that other circumstances can change in parallel with this-the general economy and other legislation-which may make it beneficial for reviews to take place more frequently. However, I will not press an open door.

Lord Rix: My Lords, I will manage to cut things short by saying that I am very grateful to the Minister. I trust that it will all come to pass and I beg leave to withdraw the amendment.

Baroness Hollis of Heigham: If we go on like this, we will finish today.

Amendment 87 withdrawn.

Amendment 88 not moved.

Clause 86 agreed.

Clauses 87 and 88 agreed.

Schedule 9 : Personal independence payment: amendments

Amendment 89

Moved by Lord Freud

89: Schedule 9, page 133, line 10, leave out from beginning to end of line 28 on page 134

Lord Freud: My Lords, the amendments in this group serve two purposes: to remove a number of consequential amendments relating to tax provisions for claimants of personal independence payment, and to align the benefit with common provisions on appealing against payability decisions when someone is imprisoned or detained in legal custody. I do not wish to dwell on the latter provision, as it is merely intended to extend common rules to personal independence payment, but I should like to offer some reassurances around the amendments that we are proposing against tax provisions.

First, let me say that these amendments do not reflect any change in the Government's plans for either welfare or taxation. The amendments are purely a procedural matter. They will remove the tax amendments

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from the Welfare Reform Bill so that suitable tax amendments can be made by a future Finance Bill or by Treasury order if appropriate. It may be helpful if I give an example of one of the tax-related provisions. Currently, Schedule 7A to the Finance Act 1994 makes provision for the letting of a vehicle to be exempt from insurance premium tax. This provision applies where the contract is made on qualifying terms, one of which is that the disabled person leasing the vehicle receives the DLA mobility component at either rate.

I should like to reassure noble Lords that, although we are removing these provisions from the Bill, the Government have committed to maintain the current passporting arrangements wherever possible. These amendments will not make anyone worse off. They do not reflect any change in the Government's plans for either welfare or taxation; they are purely procedural. The provisions will remove the tax amendments from the Welfare Reform Bill, so that suitable tax amendments can be made in future finance legislation. This will enable the tax position, including potential knock-on consequences for other parts of tax legislation, to be considered in the round.

The Government have been very clear that personal independence payment, like DLA, will be a tax-free benefit. In recognition of that absolute commitment, we have therefore decided to retain provision within this Bill to provide absolute certainty that these payments will be free of tax. I beg to move.

4 pm

Lord McKenzie of Luton: My Lords, I thank the Minister for his explanation of these amendments, which I think I understand and accept. I wondered at first when I saw them whether we had done something to upset Treasury Ministers, and they no longer wanted to come before us. To be clear, we have provisions in here relating to tax which we are simply moving out of the Bill because they are going to go back in a Finance Act. If they remained in the Bill in their current form, would that in any way invalidate them? There might be a procedural issue that has gone awry in this case, but I am still a little unclear as to why it is necessary in the event, given that those provisions are there, they could not remain.

More importantly, I am anxious that if these provisions come out of this Bill, there is certainty that they will end up in a Finance Bill. Can the Minister give us any assurance as to which Bill that is likely to be and what processes, given the oversight that we dealt with a couple of Committee sittings ago, there are in place to make sure that these are followed through and put into effect?

Lord Freud: When you look at these detailed measures, which is something that I do not encourage anyone to do who wants to retain their sang-froid, you can see that they are closely associated with taxation and trust funds. It is much more coherent for them to be dealt with in a Finance Bill or another finance Act rather than one dealing with welfare reform. That is simply the reason, because it means that if you restructure a

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piece of tax trust law, you can do the whole thing in one, rather than having to go to different Acts. That is the reason.

Amendment 89 agreed.

Amendments 90 to 95

Moved by Lord Freud

90: Schedule 9, page 137, line 35, leave out from beginning to end of line 9 on page 140

91: Schedule 9, page 141, line 1, after "paragraph 3" insert "-

(a) in paragraph (f), the final "or" is repealed;"

92: Schedule 9, page 141, line 4, at end insert-

"(i) section 84 of that Act."

93: Schedule 9, page 141, leave out lines 12 to 16

94: Schedule 9, page 141, line 37, leave out paragraph 62

95: Schedule 9, page 142, leave out lines 9 to 34

Amendments 90 to 95 agreed.

Schedule 9, as amended, agreed.

Clause 89 agreed.

Clause 90 : Transitional

Amendment 95ZA not moved.

Clause 90 agreed.

Schedule 10 agreed.

Clause 91 : Regulations

Amendment 95A

Moved by Baroness Sherlock

95A: Clause 91, page 61, line 28, at end insert "including those aged 16 to 24"

Baroness Sherlock: My Lords, I move this amendment on behalf of the noble Lord, Lord Patel, who has been unavoidably detained, as he has an important meeting on other legislation. I shall speak also to Amendment 98A.

In doing so, I am grateful for briefing, particularly from CLIC Sargent, a charity that works with children with cancer. These are probing amendments that are designed to ensure that personal independence payment is able to meet the distinct needs of young people aged 16 to 24 who have a long-term health condition or disability. I understand that the Government have confirmed that the reform of DLA for under-16s will be taken forward separately, but there is still an issue about whether PIP is able to meet the unique needs of young people aged 16 to 24. There is a concern that they will end up being treated the same way as adults, despite being much less likely to have financial independence and having fewer benefits available to them. I understand that DLA is at present the only benefit available to young people with a health condition

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which is available in all circumstances. Therefore, it is particularly important that PIP is able to meet the unique needs of this group of young people with health conditions or disabilities.

As noble Lords will appreciate, those young people aged 16 to 24 face a range of transitions as they approach adulthood. They may leave education and move on to higher education or employment, perhaps leaving their family and moving into their own home. They may enter into long-term relationships and have children; increasingly, those key transitions happen in the 20s. In particular, I am conscious that elsewhere the Government are moving to raise the age participation rate for children in education. There are also reviews going on of SEN; the disability Green Paper is looking at a co-ordinated system of assessment and support from birth to age 25. But the plans to raise participation age will mean that, for example, most 16 to 18 year-olds will still be in education or training, but PIP will classify them as working-age adults. By way of example, I understand that the best practice NICE guidance treats 16 to 24 year-olds with cancer as being a distinct group with specific social, psychological and educational needs and goes on to explain the best way for services to be shaped for this group. Could the Minister be encouraged to look at that as an approach that might be helpful in transitioning across to examining PIP?

The effect of relying on different age ranges within the benefits system not only complicates transition for long-term health conditions or disabilities but can also see them facing a cliff edge. Can I put some specific questions to the Minister? I have no desire to press this amendment but perhaps he could help the Committee to understand how the Government intend to support this group of people. Has he looked at the possibility of introducing specialist teams or a tailored approach to young people aged 16 to 24 in the benefits system? Would he consider a distinct PIP system for those aged 16 to 24, which would include an age-appropriate system of assessment for that age group? In particular, would he consider whether those already in receipt of DLA could continue to receive it until they turn 18-or maybe even up to 24, if he is feeling particularly generous today? Would he comment on the qualifying period? Could he reassure the Committee that that will not apply for those under 18, and ideally not for those under 24? Could he help the Committee to understand what approach the Government are taking to harmonising the various age limits across the benefit system?

This is a potentially particularly vulnerable group of young people, and it is important that in looking at how PIP will operate we take careful account of the impact on this group. I hope that the Minister is able to reassure the Committee. I beg to move.

Lord McKenzie of Luton: My Lords, these are useful probing amendments to understand fully what is happening or proposed in respect of this group of young people. I imagine that the Minister will say that, as the Bill stands, there are already powers to make regulations as proposed for 16 to 24 year-olds, but it is an opportunity to get something on the record. We

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certainly support the thrust of this and the needs for regulations that are affirmative-not just the first set. I think that we will hear from the noble Lord, Lord German, on that in a moment.

The age 16 already has ramifications in the DLA system. Below that age, young people cannot qualify for the lower-rate care component via the cooking test, and there are additional tests for the lower-rate mobility test. So there is already a potentially stressful transition under DLA that could be compounded with the transition to PIP. The figures that have been mentioned are that over the next three years 173,000 disabled children will turn 16. If they have to seek or apply for PIP immediately, that is a big challenge. There was a hint in the other place when this was debated that that would not necessarily be the case and that, in the scheduling of young people in this age group, they would go directly on to PIP. Perhaps we can have the Minister's reassurance or an update on that point.

The briefing note that we got from the DWP sets out the work undertaken to date, seeking to base the assessment on the education health and care plan that is being developed across government, which we would support. But I am not quite sure how it fits together on timing, particularly over the next couple of years, with PIP being relatively close by and due to be with us shortly. Can the Minister confirm to us the process of assessment for young adults and say what the likely migration process is? What happens to 16 year-olds who are on DLA at the point when PIP is introduced?

Lord Freud: My Lords, I am grateful to the noble Lord, Lord Patel, for tabling these amendments and to the noble Baroness, Lady Sherlock, for moving them in his absence. The amendments allow me to set out the Government's position on how we will deliver PIP effectively for young disabled people in a way that is sensitive to their needs. Noble Lords may be aware that the Government published a briefing document that specifically considered the position of young people. The briefing document set out some of the main insights that we have learned from them and their representatives, which are informing our design work.

Let me be clear from the outset. I know that there are particular issues and sensitivities when dealing with disabled young adults at what can be a particularly challenging period of their life. That is why we have been working closely with people aged 16 to 24 and their representative organisations in order to understand how we can ensure that the benefit is administered in a way that best meets their needs. Two main considerations that young people have raised with us are: whether 16 is too young an age to begin the process of moving from DLA to PIP; and making sure that the transition arrangements for moving on to the new benefit are easy to understand and transparent-the role of advocates and information needs, for example, being particularly important.

Under current arrangements for DLA, the child-related rules fall away at the age of 16 and the entitlement conditions to the care component are extended. The age of 16 therefore forms a natural touch-point to re-examine entitlement and take young people through

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to entitlement and receipt of DLA in their own right, where that is appropriate. Paying young people directly gives them direct control over how the benefit can enable them to live independent lives. It is our firm belief that the principle of giving individuals control over how they can tackle the barriers to their independence should be brought forward into PIP.

In developing our proposals for PIP, we know that there are particular issues that we need to address concerning its delivery to young adults. For example, young disabled people can expect to go through a number of assessments as they move from childhood to adulthood, and many of them will require varying degrees of support to negotiate those assessments. That is why we will ensure that all young people who claim, or transition on to, PIP will have the appropriate support to allow them fully to express their needs. This could be, for example, by allowing a parent, advocate or friend to accompany them to their face-to-face consultation.

We are fully involving young disabled people and their representatives as we design and build the delivery mechanisms. For example, we are working with user-led organisations through the PIP implementation development group, which is made up of a wide range of organisations including those that represent young people. We have also begun work with focus groups and have conducted one-to-one interviews directly with young people, appointees and their representatives to inform both the way in which PIP will be delivered and the transition arrangements for those moving from DLA to PIP.

As I mentioned, the transition from childhood to adulthood brings with it numerous assessments at different ages. We are therefore also working across government, in particular with the Department of Education, to see what more we may be able to join up and share information with the proposed single assessment process for education, health and social care. This means, for example, that if an individual is still in education or training, exploring whether we may be able to use evidence from special educational needs assessments or information from the school or college to inform the determination of a PIP claim. But we need to look carefully at this so that we get the right balance between not overassessing someone and having an approach that is too general to identify a person's specific needs. My officials are therefore working closely with officials in the Department of Education so that we get this right.

To ensure transparency, credibility and a smooth transition from DLA to PIP, we know that we will need to build in processes, with appropriate information and engagement, that let young people and their families know what to expect and understand what they have to do. Our intention is to ensure continuity of payment, with no gap between DLA ending and PIP starting when an individual makes a claim and subject to their meeting the eligibility conditions. We are continuing to consider how the detailed rules should work and, as with all the changes that we are making, we will continue to involve disabled people and their representatives in the design.

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4.15 pm

Following the findings from our interviews with young people, our intention is to engage early, informing them about the change to PIP before they turn 16. We intend to provide continued support right through the process of reassessment and for new claims after an individual reaches 16. We have set out in our updated policy document how we intend to continue to work closely with the disabled young adults in representative groups to ensure that the processes are flexible to needs and work smoothly and effectively for young people and their families. That document also sets out some principles that we are agreeing with stakeholders, such as early access to support and advocacy and continuous evaluation and improvement of the system, involving young people.

I had five distinct questions from the noble Baroness, Lady Sherlock. Rather than answer them verbally today, the best thing that I can do is write to her and the noble Lord, Lord Patel, addressing all the points in those detailed questions, if that is satisfactory.

In conclusion, I reiterate that we fully understand the concerns that the implementation of PIP may have for disabled young adults. We also know that the key to the success of delivering it to this group is flexibility to meet the varied needs and aspirations of disabled young adults. I am being a bit technical but the amendment as it stands would potentially limit that flexibility by imposing statutory duties that would be less able to respond and react to change, especially as we refine and improve processes as a result of our experiences. I fully acknowledge, however, that this is a probing amendment so we do not need to worry about the niceties of its wording.

I hope that I have been able to describe the approach that we want to adopt. Given the assurances that I have been able to make, I urge the noble Baroness to withdraw the amendment.

Lord McKenzie of Luton: Could the Minister clarify a point? I apologise if I have missed this. In the case of someone who at the moment is under 16 and on DLA, if they reach the age of 16 before PIP is introduced, will they undergo the normal reassessment to adult DLA? If they reach 16 after PIP has been introduced, will they automatically go through the PIP process, or could they potentially stay on the DLA adult process for a period, whatever that may be?

Lord Freud: My Lords, we have not done a detailed migration strategy. When people are effectively on adult DLA, even though they have transitioned from child DLA, we will have to work out the exact timings for when to take them. We do not have those precise details yet.

Lord McKenzie of Luton: I am grateful for that. The Minister will see that the issue that that highlights is the one that was probed: if people reaching 16 are going to go straight on to PIP, given what is going to happen with the number of young people achieving the age of 16 over the next couple of years, they are in large measure going to be first through the gate for PIP. That was the concern.

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Lord Freud: Clearly, if they go through their birthday when PIP is in position, we will have the arrangements that I was describing. If they have already gone through the gateway because PIP was not yet in position, we will have to decide on the precise migration strategy regarding whether they get priority or at what stage we would take them. That is something we need to determine a little later.

Baroness Sherlock: My Lords, I thank the Minister for giving such a comprehensive account of the Government's approach to this group of young people. I also thank him for his offer to write to the noble Lord, Lord Patel, and to me. I hope that, if he does, he will pick up the point made at the very end by my noble friend Lord McKenzie and try to address what happens to those young people who may be first through the gate and how the system can deal with them. In the light of that, I beg leave to withdraw the amendment.

Lord German: This group of amendments was designed to test the arrangements that we have in Parliament for reviewing and looking in detail at the operation of PIP. In view of the offer that we have just had from the Minister to take back all the reviewing and reporting arrangements for the whole of PIP, I think that it would be unwise of me to move the amendment.

The Lord Bishop of Ripon and Leeds: My Lords, as we come to the consideration of the cap on welfare benefits, the amendments in my name in the next two groupings concentrate on the needs of children. They are concerned not with the existence of the cap but with the way in which it operates for families with children.

Amendment 99ZA in my name and that of the noble Baroness, Lady Tyler, makes families with children a specific category within Clause 93. The clause currently has no reference at all to children. The distinction that it makes is between single people and couples, yet children are most deeply affected by any restriction of benefits. My amendments are an attempt to find ways in which families with children can be helped to care for them where there is unemployment or circumstances which make the parents dependent on benefits.

I am particularly indebted to the Children's Society for its Good Childhood report on the condition of children and the pressures on them in this country. I am also indebted to it for its work to ensure that children in deprived families are protected from the effect of capping and that the capping arrangements do not damage the needs of children and the way in which they grow up in our society. As the Bill stands, children are disproportionately affected by the cap. The Children's Society estimates that some 210,000 children will be affected by it compared with some 70,000 adults.

The amendment promotes fairness because it compares like with like. If we are to set a cap for families with children, that should be compared with working families with children-probably those with someone working more than 16 hours a week, as suggested in Amendment 99ABB. That fits with, for example, the Chancellor of the Exchequer's remarks at the 2010 Conservative Party conference that the cap should be at the level of the earnings of the average working family. I believe that most of us would see an average working family as meaning a family with children, whereas household earnings include those of childless single people, for example. This simple alteration in Amendment 99ZA could remove something like 25,000 children from the cap.

Linked in this group of amendments are those seeking to produce a fair definition of income. Amendment 99ABB aims to relate the cap to the income of working families rather than simply to their earnings. The principle behind the cap is that households should not be better off living on benefits than they would be in work. Income, for a family that is in work, includes, for example, child benefit or council tax benefit. If we are looking for an equitable comparison, then it is the amount that comes in to the household which is relevant, and not simply that which is on the payslip. To replace earnings by income, as Amendment 99ABB suggests, could remove some 38,000 children from

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the effects of the cap. Again, the concern is with provision for the growth, development and support of children as they grow up within our culture, and those who need the support of a welfare system as they grow up.

The last of the amendments in my name in this group concerns the maths by which "average" is calculated. The word "average" contains a studied ambiguity and I hope the Minister will be able to enlighten us as we look at this. At present, Clause 93(8) gives freedom to the Secretary of State to choose what he means by an average. That seems to me to be a slightly Humpty Dumpty-ish way of looking at the whole issue. It is unsatisfactory because it causes uncertainty. The mean, which is what is proposed by this amendment, is what, in my experience, is normally meant by an average. The figures are added up and then divided by the number of people concerned. It is like a cricket batting average, where the number of runs is divided by the number of dismissals to get the average. The other common so-called average is the median-the middle number. If you have a cohort of 1,000, it is number 500 in that 1,000. That is a remarkably arbitrary figure because it takes no account of the way in which there may be clustering at one end or the other of the total number of 1,000 in that particular example. However, it might well tempt future Secretaries of State, since at least, as figures are at the moment, it would be lower than the mean under current calculations. It may be that exploration could pursue a trimmed mean, which omits the highest paid 5 per cent and the lowest paid 5 per cent of working households when calculating the mean. We need some definition of average if this clause is going to make sense.

These are simple amendments, which do not challenge the basis of the benefits cap. They acknowledge the cost of bringing up children, which is at the heart of the need for family income. They recognise the struggle of parents unable to find work as they seek to care for their families. They could be crucial in helping to avoid plunging children back into poverty. I hope that the Government and the Minister will be able to explore some of these possibilities. I beg to move.

4.30 pm

Baroness Tyler of Enfield: My Lords, I should like to explain why I decided to add my name to the excellent amendments that have just been put forward by the right reverend Prelate the Bishop of Ripon and Leeds. I, too, was indebted to the work of the Children's Society, which did an excellent analysis in this area. I understand the rationale for a benefit cap. I am not trying to say that I am against it; I understand the arguments about promoting fairness between those in work and those receiving benefits, and indeed the need to reduce the cost of the rapidly growing benefits bill as part of the overall deficit reduction strategy. My concern, though, as I looked at the numbers, at who would be affected and at the types of families that would be affected, was the implications for some of the most vulnerable families, particularly families with children. I shall say a few more words about that.

I was very taken by the analysis of the Children's Society that showed that children would be disproportionately affected by how the benefit cap is

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currently constructed. While it is estimated that some 50,000 households will have their benefits reduced at the moment by this policy, it has also been estimated that over 200,000 children will be affected and up to 80,000 of those could be made homeless.

The composition of the households that are likely to be affected is interesting. The figures are one-third couples, two-thirds single women-generally single mothers-and about half will also be disabled. Indeed, 60 per cent of the households likely to be affected live in London, where housing is more expensive, particularly people living in private rented accommodation. Various ethnic groups will also be particularly affected, when they have larger families.

The first consequences of the benefit cap, unless it is possible to look at constructing it in a different way-perhaps using one of the approaches suggested in these excellent amendments-will be families having to move very abruptly to cheaper areas. This risks children moving school in the middle of a year, thereby disrupting their education and their social networks. It also risks families splitting up, and I shall come back to that point. It could have adverse consequences on kinship carers-family and friends-which is why in the next grouping I am moving an amendment on that point. I also feel that families who will be able to continue to pay the rent will have less money left for other essentials such as food and clothes, which will therefore contribute to child poverty. For families who are not able to pay the rent, are evicted and become homeless, this will be a parlous situation. Children are a priority group for council housing so this is likely to lead to additional pressure on temporary accommodation costs, adding to the cost pressures on local authority budgets. We have heard quite a bit about this in recent months.

There is then a very real danger, which has had virtually no attention, that children at risk will simply disappear from view. This raises real child protection and safeguarding concerns for me. We all know the very tragic stories of children who have disappeared from view and what happens to them in the very worst circumstances. We must ensure that the benefit cap does not, however inadvertently, have that consequence.

Then there is the reduction in what I call mixed communities, as poorer families are forced to move out of an expensive area. As I said earlier, this is particularly the case in London. Not only will it create very undesirable ghettoisation but there will be pressure on public services in ways that different bits of different boroughs will find difficult to deal with. For example, the concentration of workless households in some areas has significant potential implications for a wide range of local authority services. Boroughs that have an inward migration of households are likely to face severely increased service pressures such as demand for school places, the impact of unemployment, poverty and poor housing conditions, whereas in contrast other boroughs will experience reduced demand for such services but will themselves face challenges and costs in adapting very quickly to these different demands.

The point that I should like to finish on, which I feel particularly passionate about-perhaps because I am chief executive of the country's largest relationships

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support organisation Relate, which is a declared interest-is the inherent couple penalty currently built into the benefit cap. This has had very little attention so far, but it will affect couples substantially more than lone parents. Indeed, it has been suggested by experts in the field that the cap will introduce one of the most substantial couple penalties ever seen in the benefits system, so it could have the perverse consequence of breaking up families as well as deterring people from entering new relationships and forming new households. Surely this couple penalty is completely at odds with the Government's, and indeed the Prime Minister's, very clear stance on wishing to support strong and stable family relationships. I am sure that this is an unintended consequence and has not been thought through, but we need to look at this.

Finally, the impact would be particularly keen where two lone parents decide to move in together, particularly if they both had children from the previous relationship. Such couples could then find that they would be far worse off by moving in and forming one household rather than living as two separate households. I will not detain the Committee's time any longer, but I just wanted to explain why I feel that having some in-depth discussion of an alternative way of constructing the benefit cap is so vital.

Lord Best: My Lords, in speaking to Amendment 99AC in this group, I am very grateful to Shelter, Homeless Link and the National Housing Federation, which have formulated a series of amendments here and given invaluable advice to all of us.

It turns out that the new benefit cap is really about two factors: children and housing. As was so clearly demonstrated by the noble Baroness, Lady Tyler, and the right reverend Prelate, because the cap is not adjusted to take account of the number of children in a family, larger families will be hardest hit. The other factor for which no allowance is made in the crude calculation of the benefit cap is housing costs. No account is taken of the fact that families in otherwise identical circumstances have to pay very different amounts for their housing, not out of choice but because of where they live, what type of landlord they have and the size of home that their family requires.

Rents are far higher in some areas than in others. In London and the south-east, rents may be four times the levels in the cheaper areas of the north of England or, say, south Wales. If the accommodation is in the private rented sector, again rents can be several times higher than in the social, council or housing association sector. Of course, accommodation costs will be higher if you have a larger family. Heaven help you if you have, say, three children-let alone four, as in my own family-and you are in the private rented sector and you live in the southern half of England. If you cannot find a job, you are probably going to have to move, most likely to a cheaper area where, unfortunately, employment prospects are likely to be even worse, or you will face homelessness.

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The cap is very much about housing, and the way that it is applied relates directly to housing costs. Where a family's entitlement to benefits exceeds the cap, the cut to their state support is to be achieved, in the first instance, by cutting their housing benefit. The DWP calculates that some 50,000 households will be affected. On average, they will lose £93 per week from the amount that they can contribute towards their rent. This shortfall, which cannot possibly be covered by cutting back on food, clothing, heating and so on, rises to a colossal £150 per week for some 7,500 families. The cap also raises the prospect that some families who will have to move in 2012, because of caps on housing benefit and local housing allowance already announced, will be hit again and uprooted for a second time when this overall cap reaches them in 2013.

Amendment 99AC in my name seeks to address this fundamental flaw in the proposal for a benefit cap by excluding the housing benefit component from it. This would not save all those affected since the largest families will be left with virtually nothing with which to pay their rents if they are not to fall below the poverty line. However, it recognises the extreme consequences, even for those in smaller households, of having to pay today's market rents in so many areas. Removing the housing benefit element from the cap would greatly moderate its effect upon already very poor households.

The DWP itself points out in its impact assessment that households are very likely to go into rent arrears, which means landlords and the courts incurring the expense and effort of evictions, and local authorities facing the increased cost of handling homelessness. Shelter research shows that out-of-work families with just two children will face a shortfall in what they receive for their rent in the private rented sector in all inner London boroughs and many outer London boroughs, from Hounslow to Haringey to Newham. Those with three children will face this problem in every London borough and in 82 per cent of all local authorities throughout the south-east of England.

I may be pre-empting the Minister's response but the problem would be solved if private landlords and housing associations charging the highest rents were to cut dramatically the rents of their tenants receiving housing benefit or local housing allowance. However, we should remember that housing benefit and local housing allowance are being cut and capped in several other ways, including through the high rent caps and the restriction to the lowest 30 per cent of rents. Therefore, in total, some pretty hefty rent reductions will be necessary. I fear that there is simply no chance of private landlords, who now have lots of new customers because so few younger households can afford to buy, slashing rents to accommodate the extra cap. Rather, Amendment 99AC seeks to remove much of this problem by taking housing benefits out of the equation.

In the next set of amendments, I will look at some of the ways in which the problem might be mitigated. However, this overarching amendment seeks to remove from the problem of a simple, overarching benefit cap the housing costs that make such a big difference to who is and who is not affected by the new overall cap.

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Baroness Hollis of Heigham: My Lords, I support the noble Lord, Lord Best, in his amendment. There are some very difficult inconsistencies in the Government's policy on housing benefit, about which we should be concerned. The noble Lord talked about the fact that there is, apparently, almost a standard housing and rent element in the benefit assumptions, even though we know that rent varies from area to area and region to region.

I particularly want to pick up the point that he made about the discrepancies between the private rented sector and the social rented sector. Some of us-certainly the noble Lord, Lord Best, and I-argued very strongly against a benefit cap based on underoccupancy in an earlier round of amendments. It was clear from the impact analysis that one of the responses that the Government felt was appropriate for people who were in so-called overly large local authority accommodation-with no possibility of an internal move because the stock does not exist-was to tell them that they should move into the private rented sector. However, the impact analysis also recognised that that sector would also have increased rents, and therefore the assumption of savings that would follow from that move would not be available to the Government.

The Government are saying that if you manage to avoid your housing benefit cut by virtue of these very harsh rules on underoccupancy by going into the private rented sector, you will then come up against an alternative cut-the benefit cap. You are between a rock and a hard place: you can stay put and have your cut because of the underoccupancy rules, or you can move to accommodation in the private rented sector which apparently fits, but because of the number of children you have, you will be up against the benefit cap and again you face a cut. Which strategy does the Minister suggest people should follow in that situation? It would be helpful to know because a lot of our poorest families will be faced with just such dilemmas.

4.45 pm

Lord McKenzie of Luton: My Lords, we are indebted to the right reverend Prelate the Bishop of Ripon and Leeds for leading the charge on this. Indeed, faith communities generally have been a voice for people who might otherwise not have been heard. The need for so many amendments around this proposal in the Bill highlights the extent to which it is a badly conceived policy. Whether or not you believe there should be an overall cap on benefit entitlement, what we know about the approach taken to applying such a cap in the Bill shows it to be unfair, inconsistent and to ignore the needs of many of the most vulnerable.

This first group of amendments relates to how the benefit cap is to be calculated and shows the extent to which there are major inconsistencies in the Government's approach. The second group relates to the fact that the Government appear to have ignored the needs of many of the most vulnerable people when thinking about who is to be excluded from the benefit cap.

The Government have argued that applying the benefit cap is fair. The Secretary of State for Work and Pensions, Iain Duncan Smith, has stated:

"The benefit cap will restore fairness to the taxpayer and fairness to those who do the right thing on benefits".

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Of course, we are learning with this Government that fairness has many different meanings to different people, but it would be hard for anyone to justify the idea that the current policy will be fair to children, who, as we have heard, the Children's Society has shown are nine times as likely to lose out from the cap as adults. Out of the 50,000 households that will be affected by the cap, the Children's Society estimates that 210,000 will be hit, compared to 70,000 adults. Perhaps the Minister will tell us whether he thinks this policy is indeed fair to children.

The Bill impacts so heavily on children in part because of the way that the Government have stated that they will calculate the level of the cap. At present it is proposed to set the benefit cap at two different levels. The first, for single people without children, will be introduced at around £350. For couples, it will be introduced whether they have children or not, and for single parents with children the cap will be introduced based on net average earnings for a working household with or without children, which the Government estimate to be around £500 per week at the point of introduction.

We should note that that proposal creates a substantial couple penalty, which the noble Baroness, Lady Tyler, spoke about. Research by Family Action showed that for two lone-parent households that decided to move in together this penalty could be as much as £9,000 a year. Does the Minister believe that financial penalties of this type form a disincentive for families to move in together? If so, what assessments has his department made of the likely impacts of applying the cap in this way on the rates of lone parenthood and cohabitation?

We note that while the universal credit has a higher personal amount for couples than for single people with children, the benefit cap has not followed the same principle. Not only is the current calculation unfair towards couple families, it is also unfair in its comparison between those in and out of work. Both working and non-working families were able to receive child benefit and housing benefit. As the level of the cap is based on earning levels rather than income, however, these will, as the right reverend Prelate said, be excluded from consideration of the amount of money that working families have to live on but included in the calculation for those out of work. Amendments in the next group seek to exclude child benefit and those in this group to exclude housing benefit from being included in the calculation of total income for out-of-work families. Perhaps now the Minister could explain exactly the basis on which this method for calculating average family earnings was chosen.

In-work benefits, including working tax credit and, subsequently, universal credit, will also be excluded from the calculation of the level of the cap, but not from the calculation of the amount of income that out-of-work families are expected to live on. Here we come to another lack of clarity about the Government's approach, as it is once again not clear what the definition of work is expected to be for the benefit cap when universal credit is established. Before universal credit is established, the cap will initially be applied to housing benefit, and the note with the draft regulations that we received states that a claimant in receipt of housing

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benefit will be considered to be in work if they are entitled to working tax credit. It has been announced that when working tax credit is abolished, there will be a corresponding exemption for people on universal credit who are considered to be in work. The precise criteria for this exception are still being considered.

Again, the thinking behind the benefit cap appears to be out of kilter with what is behind the universal credit. Indeed, the Government have just spent a large amount of money on ensuring that households working under 16 hours will still be able to claim support with childcare costs under universal credit. Yet in benefit-cap terms, it seems that working less than 16 hours is not really considered as work, and it is possible that this childcare support will be removed by the restriction on the total amount of benefit that a family can receive. Large families may be caught in a trap whereby any move into work brings with it additional childcare costs, which are then reduced by the cap to the extent that working is no longer worth while. Does the Minister believe that a family in which someone is working for less than 16 hours a week is a "working family"?

Amendments 99ABAA and 99ACA in our names seek to understand why housing benefit and council tax benefit have been included in the benefit cap. At present, the proposals seem both unfair and unworkable. The differences in rent around the country, as we heard from the noble Lord, Lord Best, mean that families in different areas will be affected very differently by the cap, with the most severe impact on families in London. As the Government's own impact assessment states about the possible impacts of the cap, it is likely to affect where different family types will be able to live, housing benefit may no longer cover housing costs, and some households may go into rent arrears. This is a direct consequence, they acknowledge, of government policy. Some households will be pushed into rent arrears, which will require expense and effort by landlords and the courts to evict and seek to recoup rent arrears. Some households are likely to present as homeless and may, as a result, need to move into more expensive temporary accommodation at a cost to the local authority. These costs are likely to fall most heavily on local authorities in London. Shelter, Crisis, Homeless Link and the National Housing Federation state that although the cap has been characterised as a cap on large families, high rents in London mean that families with just two children will be subject to the cap in all inner London and many parts of outer London, including Newham, Haringey and Hounslow, because of higher housing costs in those areas. London Councils points out that rent levels vary widely across the country. London has the highest average private sector rents in the country, at £220 per week, which is more than 35 per cent higher when compared to £164 nationally. It is estimated that more than 50 per cent of couples with more than three children in London are unlikely to be able to afford their rent.

The benefit cap will come on top of the already imposed cap on the local housing allowance, as we have heard, while Shelter, Crisis, Homeless Link and the National Housing Federation state:

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"Unless housing benefit is removed from the calculation of the cap there is a risk that low income households will be displaced from large areas of the south-east, on a scale far wider than that feared in response to"

the local housing allowance caps. For families already hit by those caps, the organisations state,

"there is a risk that they could be hit again and forced to move twice within less than a year",

as the noble Lord, Lord Best, said. What estimates has the Minister made of the additional cost to local authorities in London and the increased costs that they are likely to face as a result of the household benefit cap?

In the post-Bill world, these same local authorities will also be delivering council tax benefit. For the Government to be able to take council tax benefit or its replacement into account for the purposes of the cap, they will therefore need local authorities to tell them who is in receipt of the benefit and how much they are receiving. What arrangements does the Minister expect to be in place to ensure that the benefit cap correctly takes into account the amount of support with council tax?

The variation in local authority support for council tax also means that how families are affected by the benefit cap will vary by local authority. Those local authorities faced with additional costs in temporary accommodation as a result of the cap may be tempted to recoup their costs by limiting the amount of support that they give with council tax-knowing that, in effect, the DWP will pick up the bill by paying out more universal credit before the benefit cap is imposed. Perhaps the Minister can tell us what estimates have been made of the potential for savings from the benefit cap to vary, depending on the level of council tax support put in place by differing local authorities.

The Minister may say in his response that according to the impact assessment the benefit cap is expected to hit just 50,000 households-roughly 1 per cent of the out-of-work benefit caseload. Yet the impact on these families will be extreme, with an expected average loss of £93 a week. He may also tell us that he has no money and no way of recouping the expected savings from this policy of £225 million in 2013-14, and £270 million in 2014-15. However, it is clear that the costs of this policy, not only in terms of family well-being but for local authorities, will be high. The amendments proposed today seek to rescue this policy and to ensure that it can retain some aspects of the fairness that the Government say that they are aiming for. I hope that the Minister feels able to accept the amendments.

Perhaps I may conclude with a few questions. The impact assessment, as has been discussed, sets out the consequences of the benefit cap-that it will force people into rent arrears and cause them to be evicted-but it has not been able to put a cost on that. Do central Government accept that this is an increased burden on local authorities which, under the Government's policy, should be met on one basis or another, and has any further work being undertaken to quantify this? What about the costs falling on the devolved Administrations? As to those Administrations, which benefits, if any, are included under Clause 93(9) that could be capped in England but not in Wales or Scotland? Perhaps the Minister could let us have a detailed note, not today

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but by correspondence, on the local authority obligations to individuals and families made homeless by these provisions and the types of rules that local authorities have to take into account, particularly in relation to local connections.

Can the Minister also say something about the number of people who will be affected by this cap and who live in social housing? I think that a figure of something like 70 per cent was discussed in the other place, but that may not be up to date. The point is that social housing is, generally, of lower cost than pretty much any other housing around. If people in social housing are being forced into rent arrears and eviction, the only consequence will be that they will face being rehoused in higher-cost accommodation.

Baroness Hollis of Heigham: Does the noble Lord not agree that, with the new affordable rents-which are going to be 80 per cent of market rents-we could end up with social housing being higher than the benefit available to somebody on the 30th or 20th percentile in the private rented sector?

5 pm

Lord McKenzie of Luton: Indeed, I very much agree with that. In fact, one of my other questions to the Minister is to ask what assessment has been made of the impact of the capping policy on RSL's ability to charge rents of up to 80 per cent of market value, which is the key to the housing programme that the Government have promulgated. They have moved away capital spend to revenue spend. Perhaps the Minister could spell out more generally the whole evidence base for this policy that is presented to us.

I also ask the Minister-because part of the rationale is supposedly its impact on work incentive-whether, out of the 50,000 households expected to be affected by the cap, he could split that 50,000 between those who are within income support currently, those who are within the WRAG, those in the support group and those in the full conditionality regime of JSA. Does he agree that the cap will effectively create a cliff edge that undermines a key benefit of the universal credit? Whether it is hours or income, movement to either side of the cut-off point could be dramatic. What modelling has been done to assess the consequences of that?

Finally-for the time being-I ask the noble Lord for his comments on the report from the Centre for Social Justice, which I think is an organisation dear to the Minister's heart. It says,

"we do share some of the criticisms about how such cuts are being introduced in the welfare system".

That was a reference to child benefit. The Centre for Social Justice goes on to state:

"But our main contention is with current plans to introduce a full benefit cap on households in one fell swoop. Without the careful phasing in of such a cap ... the CSJ is concerned it will bring hardship to as many as 50,000 large families who will have the plug pulled from under them overnight".

As we discussed, average losses are projected to be £93 a week. The Centre for Social Justice states that, "it is likely to be devastating" and that the Government should think again urgently about their implementation plan. Does the Minister accept that assessment?

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Lord Skelmersdale: Before my noble friend the Minister responds to the questions asked by noble Lords, it seems to me that the key to all these questions is in Clause 99(4)(c)-in other words, what exceptions to the application of the benefit cap are due to be made? As I understand the matter, the average annual salary for a full-time worker is currently £25,900 a year. In his very long speech, the noble Lord, Lord McKenzie, talked about the amount of money out-of-work families are expected to live on. Those were his exact words. I find it extremely difficult to anticipate that the amount of money out-of-work families are expected to live on should be more than the average annual salary for a full-time worker.

Noble Lords: Oh!

Lord Skelmersdale: Can I just finish? I accept that this will involve lifestyle changes. It is inevitable, is it not? Noble Lords have spoken about housing. There is no doubt that idleness-no, idleness is an unfair word-having more time than someone in full-time work costs money. How and with what-

Lord McKenzie of Luton: Would the noble Lord approve of a lifestyle change that forced someone out of a council house, whatever the level of rent, into much more expensive private sector accommodation because they had been made homeless? Is that a lifestyle change that the noble Lord would approve of?

Baroness Hollis of Heigham: Perhaps I may add to my noble friend's comments. Would the noble Lord care to compare apples with apples rather than apples with oranges-in other words, not compare the situation of a single man earning the average of £25,000 with the situation of a family who would also be entitled, for example, to child tax credits? If the noble Lord is going to make comparisons, he must in all integrity compare like with like.

Lord Skelmersdale: If there is a family where the sole income comes from either the man or the woman, then the situation is as I have described it. If, however, someone is working full time and someone is working part time, then the situation is clearly different, which is what I suspect the noble Baroness means.

Baroness Hollis of Heigham: The noble Lord is incorrect. He is failing to recognise that a man in work with a family at that income level will be entitled to tax credits that go into his net income. He is failing to take into account the additional benefits that come from the state over and beyond wages for someone in full-time work. He must compare like with like in all integrity.

Lord Skelmersdale: In that case, it would be useful for my noble friend Lord Freud to tell us how many families with an income of £25,900 a year are on benefit of any sort. I cannot imagine that he will be able to do so off the cuff but-

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Baroness Lister of Burtersett: Perhaps I may intervene. I can tell the Committee off the cuff that all of them with children will be receiving child benefit, which has a 99 per cent take-up rate. They will be receiving exactly the same amount in child benefit as people out of work, and one of the amendments in the next group will address this matter.

Lord Skelmersdale: My Lords, as I understand it, everyone with children gets child benefit, so you can cut that out quite regularly because you know that it is going to come under subsection (4)(c)-that is inevitable. As I said at the beginning, we will find out from my noble friend what exceptions the Government are currently planning in order to change what the noble Baroness, Lady Hollis, calls apples and pears into apples and apples or perhaps pears and pears.

Lord German: My Lords-

Noble Lords: Oh!

Lord German: I hope that I have followed your Lordships' normal pathway by allowing those who have put their names to amendments to speak first. I understand that that is what your Lordships' House wants and therefore I have done the appropriate thing. If I had had an amendment in my name, I would have spoken earlier. However, I am quite happy to speak now if your Lordships will permit me. I pay tribute to the right reverend Prelate the Bishop of Ripon and Leeds for introducing this issue, and particularly for his amendment relating to children. That is probably the subject on which I shall focus primarily. It is also an issue where there are unintended consequences, on which some of this debate will focus.

I think it is worth starting with what is in the impact assessment for this proposal, which outlays the Government's objectives in achieving some policy ambitions and states quite clearly that it is intended to deliver fiscal savings. The other two matters relate to dealing with the fundamental unfairness of working families seeing families on benefits living in homes which they cannot themselves afford, and the incentives to help people to work.

I believe that a cap is an appropriate device for accomplishing ambitions of this sort and later I shall give some of my reasons for saying that. However, it is important that whatever the cap or caps may be, they must fit the heads on which they are placed. I do not believe that the cap as currently constructed does the job or serves the purpose that the impact assessment lays out. That is because there are of course some unintended and perverse consequences as a result of the way that it is currently being calculated and laid out. As currently crafted, the cap produces a number of these unintended consequences but exploring them does not negate the importance of having a cap or caps. The evidence demonstrates that the current approach will need amendment in order to fulfil its intended purposes.

I should like to address the issue of fiscal savings. I am sure that all noble Lords will have seen the letter from the Secretary of State for Communities and

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Local Government to the Prime Minister, sent via their Private Secretaries, in which the Secretary of State says of this proposal that there are,

"serious practical issues for DCLG priorities".

The letter continues by stating that an additional 20,000 people will be accepted as homeless, according to the DCLG modelling. That is presumably done by those who would know what the outcome would be in a set of circumstances described by government. The letter goes on to say that this would mean additional expenditure in dealing with homelessness and for temporary accommodation, and further that the £270 million savings that the DWP budgets expects to make would be negated by the additional expenditure elsewhere. That is not my interpretation-those are the words I have read. There would, indeed be a net cost to the taxpayer. If these figures stand up to scrutiny-and I certainly have not seen any rebuttal of those figures-the cap as crafted will be at an additional cost to the taxpayer. I should like my noble friend the Minister to tell me: has there been or is there a rebuttal of the figures from the Secretary of State for Communities and Local Government?

However, that does not deal with the second policy objective that we have to face: the unfairness of working families seeing benefit recipients living in homes that they could not themselves afford. The challenge is to satisfy this need and at the same time avoid the consequential homelessness that the Secretary of State for Communities and Local Government has indicated. This issue has been left to fester for far too long. The previous Government placed it in the "too hot to handle" or "too difficult" category, or put it in the long grass pile-whatever metaphor you wish to use. However, as is always the case with very difficult issues such as this, they will simply not go away without some form of policy intervention.

Lord Boswell of Aynho: I regret that I was unable to attend the earlier part of this discussion, although I am very interested in what is being said. On the matter that my noble friend just raised, has he been able to discern a clear position from Her Majesty's Opposition as to the principle and, further, as to the levels or basis of execution of policies in this area of benefit cap? I am not sure where they stand.

Lord German: I have not been able to get a clear position. However, I was somewhat interested to hear yesterday the Shadow Chancellor declare that his party is in favour of having limits. Perhaps other noble Lords might explain what those limits are. However, as the Secretary of State for Work and Pensions said in the House of Commons-as I believe I am now allowed to call it-the benefit cap,

"is about those who we believe should be able to go to work but are not doing so".-[Official Report, Commons, 15/6/11; col. 882.]

Therefore, the purpose of this set of clauses seems to be to try and achieve a balance of fairnesses. Very importantly, we cannot see a rise in costly homelessness that penalises mainly children who are in large families and in high-rental areas.

The cap, as proposed, would punish children for the decisions of their parents. Children have little or no control over the upbringing they receive. I wonder whether the current cap, as defined here, could encourage

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family breakdown as families split up in order to get their benefit entitlement under the cap level. In terms of maintaining family structures, this surely cannot be right.

The first issue to be tackled is the one mentioned by the right reverend Prelate the Bishop of Ripon of Leeds-mean and median. The Bill clearly refers to,

"the average weekly earnings of a working household in Great Britain net of tax and national insurance contributions".

However, as many noble Lords have pointed out, there are of course working households with children and working households without children. Working households with children also receive child benefit and possibly tax credits, and other benefits as well. Therefore, if you do the mathematics, a cap measured across average earnings based on working families with and without children can only be tougher on those households with children and easier on those households without children.

5.15 pm

In fact, I looked at the Family Resources Survey figures for 2009-10, which are the most recent figures that are publicly available and are, I understand, the figures on which the cap levels have been worked out. The issue is quite simple: households with children have a higher median income-to use the words used by the Family Resources Survey-than all households, by £3,380 per annum per household. In other words, if you had a household with children you would be higher than the median. Also, the range of median incomes, by region across the whole of Great Britain, spans a gap of £12,000. London households have a higher median income than UK households, by £4,271 per household. Scottish households have a lower median income than UK households, by £8,522 per household. It is quite clear that if you are going to measure across the country, either by families with and without children or by families in different parts of the country, you are not looking at the actual real figures for those families.

Two points follow from that. First, in order to be fair to households with children, the Government should take separate averages for working households with children and those without children. Not to do so will unfairly benefit households without children and discriminate against families with children. For families with a few children, the impact will be tough; for those with five, six or seven children, the burden will be devastating.

Secondly, when measuring the average, the Government should take note of working family income, including additional income such as child benefit, which every working family with children-or 99 per cent of them-will get. Not to do so would, again, shift the average working family income against which the cap is being set against families with children and, relatively, help those families without children. Additionally, because of the difference in the levels of income between one part of the country and another, it is obviously important that some financial support is needed for those local authority areas where private sector housing rentals are very high.

We also need to be able to help those people to adapt to the changes that are coming to them. It seems to me that time to adapt is a very important point to

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highlight in this policy. It is necessary for existing households caught by the cap to be given the time to prepare for its implementation. For example, they might want to seek work or negotiate a planned move to a cheaper area. Such a transition period would allow those who are furthest from the labour market the time to gain the necessary skills and experience to enter work. The obvious way to achieve this would be to open up early access to the work programme, thereby ensuring that the appropriate levels of support are in place very quickly.

I would also like my noble friend the Minister to assure me that there will be a grace period for people who find themselves out of work through no fault of their own. People need the breathing space to be able to find a new job and to get themselves back into work. The rationale behind this Bill is making work pay. Opening up the work programme and giving people time to find another job, for all those households that will be affected, should be a first and not a last resort. There is also no doubt that households with large numbers of children will be hit hardest by the cap. These parents, often lone parents, will need time to work through the problems of finding affordable childcare. There is a case for saying that there will be grace periods for those who are immediately caught by the cap, but that new potential claimants should be made aware that the cap will be applied immediately to them if they exceed the limits that are eventually set.

There are many ways in which the cap can be made to fit. In the search for a balance of fairness to both working families and children in non-working families, the cap level can be constructed to meet these dual ambitions much better. The Secretary of State for Communities and Local Government has already told us that the cap as constructed would produce no savings to the taxpayer. I am sure that many of your Lordships see the merit in this balance of fairness. This stage of the Bill gives the Government time to consider all these issues. Changes are needed, and I would want to see them. The Government have said that they want to balance their budget, but not on the backs of the poor. Well, neither should it be on the backs of children. These children should not have to pay because of the actions of their parents. I know that the Government are listening. I would like to know when we can hear the result of their deliberations, because there must be a way of making the cap fit.

Lord Freud: My Lords, these amendments seek to increase the amount of welfare benefits that households which are out of work will be able to receive to above the level that we have said we will be introducing for the new benefit cap. Before I speak to the specific points that they raise, I need to make it clear that the coalition Government believe that there has to be a limit on the overall levels of benefit that it is appropriate for the state to provide to those who are not working. Indeed, I understand from the comment of Liam Byrne MP in yesterday's Observer that this is also the position of the Opposition. Perhaps the noble Lord, Lord McKenzie, will be happy to confirm that.

A welfare system that provides payment at unrestricted rates ultimately serves nobody-not those paying taxes to fund it and often not those it traps in welfare

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dependency by providing little or no incentive to move off benefit and into employment. It is important that the benefits system is fair and is seen to be fair. We do not believe that it is appropriate that households getting out-of-work benefits should receive a greater income from benefits than the average weekly net wage for working households.

We believe that the cap for lone-parent and couple households should be around £500 a week, which is the level of median household earnings. This is the equivalent of a net salary of £26,000 per year, or a gross figure of £35,000 per year. There will be a cap of around £350 per week for single-adult households. Therefore, even within the limits of the cap, households will still be able to receive significant amounts of financial assistance from state welfare payments-an amount equal to the median national wage without going out to work. To make that explicit, it is the equivalent of what more than half the households in the country are earning.

The right reverend Prelate's Amendment 99ZA and several of his other amendments seek to differentiate and improve the position of families with children in the way that the cap is calculated and applied. I acknowledge that, because of in-work benefits, there will be some working households that earn at the level of the average weekly wage whose total income will exceed the level that we are setting for the cap. However, we believe that work should always pay more than out-of-work benefits. That is one of the driving principles of the Bill and at the heart of our welfare reform.

When we introduce the cap, we intend to use a method that looks at median earnings after tax and national insurance for all working families, which will strike the right balance between providing support for families, promoting fairness between those out of work on benefits and those in work and, crucially, ensuring that there are clear financial incentives to work because work is the best route out of poverty. The benefit cap provides a clear, simple message that there has to be a maximum level of financial support that claimants can expect the state to provide. The aim of this policy is to achieve positive effects through changed attitudes to welfare, responsible life choices and strong work incentives. People must be encouraged to take responsibility for their decisions in light of what they can afford. I accept that a case can be made for making the estimate in a variety of ways. However, I should make it clear that the clause would provide us with flexibility, should it be necessary in future to adapt how we estimate average earnings if it is felt that we are no longer achieving the correct balance.

I will address Amendments 99ABAA, 99AC and 99ACA together, as they are all concerned with housing-related benefits. Each of these amendments would undermine the fundamental principles underpinning the cap-that, ultimately, there must be a limit to the amount of benefit that a household can receive and that work should pay. It is not right that some families on benefits have been able to live in homes that most working families could not afford. With the introduction of the cap, people receiving benefit will have to make the same choices about their housing that people who do not get benefit make.

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The noble Lord, Lord Best, raised a point about whether the cap will force families to move. It will not necessarily mean that people need to move but they will have to make the same choices about affordability as those in work. While some may well choose to move, there are a number of ways in which they might be able to meet any such shortfall, such as moving into employment, trying to negotiate a reduction in their rent-I accept the noble Lord's point that in some cases that may not be possible-and meeting it from other income or capital. The Government are looking at ways of easing the transition for families and providing assistance in hard cases. We recognise that there are households for which it would be inappropriate to restrict the amount of benefit that they can receive. We have announced the groups that we intend to exempt and will discuss these groups further as we move on to the next debate.

The noble Lord, Lord McKenzie, asked about childcare-specifically whether those working a small number of hours will be eligible for support for childcare costs through the universal credit. I confirm that support for childcare through the universal credit will not be affected by the cap.

Lord McKenzie of Luton: Could the noble Lord clarify whether he is saying that it will not be included in the total of benefits that is judged against the cap, or whether it cannot be withdrawn from that component of the benefit?

Lord Freud: It is the former. It may be helpful if I explain now that we feel that the best way to support these households is to exempt them completely from the impacts of the cap, rather than attempt, as these amendments do, to alter its design to accommodate their particular circumstances. For the groups to whom the cap applies, this measure creates a very strong incentive to work. The most effective way of smoothing transition will be to engage closely with those families likely to be affected by the cap in the year before it is implemented. We are having initial discussions with local authorities and will provide them with guidance on the implications of the caps so that they can take account of this when working with affected households, especially those affected by the LHA cap.

On the council tax benefit question, I confirm that we are looking at the implications of localised support for council tax, including the implications of decisions taken by the devolved Administrations.

5.30 pm

Baroness Hollis of Heigham: If the Minister is staying on this point then I will sit down, but before he goes on to another point, could he please clarify further? Say that there are two households in band D in two different local authorities for which the council tax charge in one borough is £20 a week and in the other is £30 a week. In the first borough, the localised benefits system effectively allows a rebate of £15 out of the £20, but in the other borough facing £30 a week there is a localised council tax benefit of only half that sum, which is also £15. When it comes to calculating the universal credit, what elements of that mess will

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the Minister take into account? Will he look at the putative council tax that should be paid and the benefit or the net sum paid? What counts as income? What counts as cost? How will this be done when everyone will have a different calculation to be made locally?

Lord Freud: The noble Baroness is, as always, way ahead of the curve. As I hope I explained, there are several things that have to happen before we come to deciding some of those issues, and we need to know the shape of any replacement for council tax or the impact of localising council tax, which as yet we do not. I am left with my previous observation that we will take that information into account when we have it, but we have all the powers to do that so there is no issue here regarding our not being able to do it.

Baroness Hollis of Heigham: I understand the dilemma that the Minister faces and that it is not a dilemma of his making, so I have great sympathy with him. Will he expect income to be the council tax benefit, or the council tax benefit minus whatever element the individual may be expected to pay? In other words, are we dealing with gross or net? It could vary by £15 or £20 a week between two different households with similar income in adjacent boroughs, and that will make a lot of difference to their actual outgoings.

Lord Freud: Regrettably, yes, it may or it may not. That will depend on how we reach our design by taking in the implications of localised support. I cannot design a system on the spot when we do not know several of the components, but we have the powers here to take that into account and we are planning to do so.

Lord McKenzie of Luton: Will discretionary housing payments be included as benefits for these purposes?

Lord Freud: They will not be included. Moving on, with regard to the couple penalty, we should not assume any automatic link between the benefit cap and family breakdown. One of the key drivers of family breakdown is long-term unemployment, which puts considerable pressure on vulnerable families. One of the most supportive things that we can do for these families is ensure that work always pays and that the transition to work is as smooth as possible.

The benefit cap is intended to support our new universal credit, which will improve the incentive to work and the level of support for many low-income families, especially couples with children in rented accommodation. At the same time, we will also look to offer additional support through Jobcentre Plus. This would include working with local providers to support claimants with budgeting and the management of their housing costs, and encouraging families affected to engage with more employment support, particularly the work programme. We have always made clear that we would look at ways of easing the transition for families and providing assistance in hard cases.

Picking up the remarks of my noble friend Lord German, where he read from a putative letter-

Noble Lords: Putative?

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Lord Freud: Putative is a good word. The figures to which he was referring came from internal modelling from the Department for Communities and Local Government which had not been externally validated. That analysis was out of date, having been produced in January and before we announced that we were looking at transitional arrangements for dealing with particularly hard cases. It is not possible to predict robustly the effects of this policy on homelessness as we cannot anticipate the resulting behaviours of tenants or their landlords. We will think carefully about all these matters, but the clause is drafted so that we have all the powers we need to ensure, through regulations, that the cap achieves its purpose in the fairest way possible.

Picking up the question of the noble Lord, Lord McKenzie, on the devolved Administrations, under Clause 93(9) we will be able to reduce only payments that are the responsibility of the United Kingdom Parliament. No payments that are within the legislative competence of the Scottish Parliament, the National Assembly for Wales or the Welsh Ministers will be reduced by the cap.

Lord McKenzie of Luton: I understand that; I have read the clause. I was trying to understand what might be included in the items that cannot be capped in Wales and Scotland.

Lord Freud: Such payments could, however, be taken into account when determining whether the cap itself should apply and whether the non-devolved payment should be reduced. Presently, we expect the cap to apply to housing benefit and ultimately to universal credit, which are the responsibility of the UK Parliament.

The next, or rather the last, question put by the noble Lord, Lord McKenzie, was on whether the Government accept that there would be an increased burden on local authorities as a result of this measure. The impact assessment recognised that there could be a cost to local authorities in connection with temporary accommodation. That is why we intend to work closely with local authorities on the implementation of the cap.

Baroness Sherlock: Could I just press the Minister for a moment on that? Have the Government looked into what other costs there might be for local authorities? For example, what if families with children were forced to move only to boroughs such as Haringey or Redbridge? Has the Minister looked into the matter and, if so, could he tell the Committee what would happen about the availability of school places or of other forms of support or social services, in those boroughs? Could he share the information with us?

Lord Freud: My Lords, the principle, as noble Lords will know, is that the grants to particular local authorities reflect the number of people living in those authorities. Therefore, there is an automatic adjustment process. I accept there are some timing issues if there are sudden movements, but the DWP is talking very closely to DCLG about these practical implementation matters.

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I come to an end with this question. As I understand it, certainly the parties in the Committee-I am not sure whether that covers all the Back-Benchers-are all signed up to the principle of the cap. We believe that the cap is the right approach. In the light of these comments, I hope that the right reverend Prelate and the other noble Lords will withdraw their amendments.

Lord McKenzie of Luton: My Lords, I thank the Minister as ever for his detailed response but there are still a few questions left unanswered. I can confirm that he correctly sets out the position of the Labour Party in respect of the cap, but we want to see something that is evidence-based, properly analysed and fair to people. This is our great concern with what is on the table at the moment. The Minister did not deal with the analysis of the 50,000 households to be affected by this and the extent to which they are in a group which is subject to full work conditionality. If a big thrust of this is to look at work incentives but it then applies only to a minority of those people, where does that leave the policy?

Lord Freud: I think that we have a scattering of figures in this area. It is a minority, which I think is around 10 per cent. If the noble Lord is after a detailed response, I ought to offer to write on that matter if it would be satisfactory to him.

Lord McKenzie of Luton: That would certainly be satisfactory but even if that 10 per cent estimate is roughly right, it means that 90 per cent of the people who will be affected by this cap are under no obligation, under the Government's policies, to have full work conditionality. How does that square with the big thrust of this being about work incentives? I should also like to follow up on another point which the Minister did not touch upon: the profile of those, again within that 50,000, who would be tenants and paying rent of one sort or another. Is it the case that a significant proportion of that 50,000 are tenants of social landlords, RSLs or councils?

Baroness Lister of Burtersett: While the noble Lord is conferring, can he perhaps explain to the Committee what behavioural effects the Government are trying to achieve in the case of those who are not required to seek work?

Lord Freud: On the figures, one reason why I am slightly betwixt and between is that we are looking at that impact assessment, which is now somewhat dated, with a view to updating it and providing fresher figures when we can. That work is in progress and we are getting some more detail. All that I can do is to offer to provide some of that extra detail as soon as we get it. I am not completely sure yet of its timetable but there is ongoing work there, which is why I am slightly hazy about exactly what some of these figures will end up being, for which I apologise.

Baroness Sherlock: Before we leave this point, my noble friend Lady Lister just asked what is for me the crucial question: what behavioural impact does the Minister want this to have? He told the Committee earlier that if people did not want to be forced to move

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house, they could do one of three things: they could negotiate their rent down, but he acknowledged to the noble Lord, Lord Best, that that might not be possible; they could move into work, but he has just told the noble Lord, Lord McKenzie, that 90 per cent of them are not required to work; or they could use savings. We know from discussions earlier in Committee that most people in this situation have almost no savings. What is he trying to achieve?

Lord Freud: My Lords, I am going to revert to principle here. The principle of our policy sets out that the equivalent of £35,000 of earned income is a reasonable maximum amount of benefits for the state to pay someone who is living on them. Clearly, we are aware of concerns about the impact of a cap in some specific circumstances, and the clause is drafted as it is in order to give us the power to set the cap so that it achieves the purpose in the fairest possible way.

5.45 pm

Lord McKenzie of Luton: I am sorry to press the Minister but, for us, the percentage of people affected by the cap who might be tenants of social landlords is a hugely important issue. I accept that the information has been updated but perhaps he can at least confirm the original estimate. Does he not understand that it is impossible for those people to get lower-cost housing? Generally you cannot get housing that costs less than social housing, so what are those people meant to do?

Lord Freud: The best I can say is that according to the current published impact assessment roughly 70 per cent of those affected are in social housing. However, the direction of travel of those figures in the new assessment is downwards, although I do not know by how much.

Baroness Hollis of Heigham: I am not sure that I have an answer that I fully understand. The noble Lord, Lord Best, raised the question of affordable housing, which, as we know, is to be set at 80 per cent of market rents. The market rent for a three or four-bedroomed family house not in central London but in some of the outer suburbs might well be £1,200 a month or £300 a week. Social housing with an affordable rent would therefore have to be 80 per cent of that £300, which is £240 a week. Let us assume that a family consists of a husband and wife with two or three children. He is in work and is paying an affordable rent, then his job collapses and he goes on to UC. He then finds that £240 a week has to come out of his benefit and he is up against the cap. Precisely what is he going to do? Obviously he is going to search for work but what does he do in the meanwhile? This is an affordable rent, being 80 per cent of a market rent, yet this is social housing, so there is nowhere else for him to go. What does he do? As my noble friend said, the probability is that he has very modest savings, otherwise he would not be in that sector in the first place, and he has children in school. It may well be that he cannot reasonably expect to get a job within the next six months, however frantically he tries, and he is then up against a benefit cap while in social housing with children. What does he do?

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Lord Freud:My Lords, I have made it clear how we ease the transition for families, and that is one of the things that we are looking at.

Baroness Hollis of Heigham: Can the Minister at least help the Committee by indicating the shape-I shall not try to hold him to the precise details-of that transitional arrangement? Will it be over three years, or alternatively will extra resources be available through the discretionary housing allowance via the DCLG in order to allow local authorities to smooth that transitional arrangement? Would there be exceptions for particular payments, such as higher housing rent, because we are talking about social housing and affordable rents? Alternatively, would the Minister suggest to the DCLG that that rent could go from being affordable to the average social rent, even though that would then inhibit the ability to carry on with new building? I can think of three or four ways of doing it but what does the noble Lord have in mind?

Lord Freud: Regrettably, I am not in a position to be drawn. All I can say is that we are looking at how we can ease the position for families and how we can provide assistance for hard cases. I know that the noble Baroness has already created four different scenarios and ways of doing it, for which we are grateful, but that is all I can say at this point.

Baroness Hollis of Heigham: But it is a problem of the Government's own creation. This is the difficulty-there is no evidence that this will have any longer-term savings cost.

Lord Freud: I should like to engage in a detailed debate on this, but all I can tell noble Lords at this stage is that we are looking at how we ease the transition for families, and we are looking at providing assistance in hard cases.

The Lord Bishop of Ripon and Leeds: I have two points. First, do I understand that now, in contrast to the research done some months ago, a far lower proportion of those affected by the cap are in social housing? If so, where have they gone-the people who were in social housing a few months ago but who no longer are?

Going back to the original amendment that we are, in a way, discussing, my second, unconnected, question is that I have still not quite understood why it is inappropriate, when looking at the cap, to look at families with children separately from couples. We have the distinction between singles and couples. Surely, in any discussion of how a cap should operate, children are fundamental and families with children are fundamentally different from those who do not have children. Should that not somewhere come into the way in which the cap, and therefore this clause, are established?

Lord Northbourne: I support that view.

Lord Freud: As to the first question asked by the right reverend Prelate on where all the people in social housing have gone, the situation is, to be honest, probably nothing more than a result of greater depth

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of analysis. I do not think that there is any real movement there but, as we have homed in and obtained more information, that is our understanding.

On his second question, the interesting reality is that childless couples have higher earnings than couples with kids. Perversely, therefore, having a differentiation based on what actually happens would have the opposite effect to the one that I imagine the right reverend Prelate wants. That is the point. It is not a useful approach because it would do exactly the opposite.

Lord McKenzie of Luton: My Lords, is that right? It might be right if you are looking at earnings, but if you are looking at income, which was part of the proposition, it might not be the case.

Lord Freud: I very elegantly have a wonderful piece of paper to hand. On the median, it works for total income-all gross and net household income-and it works for the mean. I can give noble Lords all the figures but it would bore them.

Baroness Hollis of Heigham: If the Minister could circulate those figures to all Members of the Committee, it would be very useful.

Lord Freud: I am sure that noble Lords probably have them at their fingertips anyway. They are meant to be accessible figures, but if noble Lords would like some help and for me to use up another Scandinavian forest, I will circulate them. I will put them in an e-mail instead. That would be cheaper.

Lord McKenzie of Luton: I am sorry to come back to this but there are still some unanswered questions. I do not think the noble Lord dealt with the definition of "in-work" and when the cap will apply. Is the threshold set at 16 hours, as it is for working tax credit at the moment? How will that change from April? I think for couples there is a joint requirement for 24 hours a week, rather than 16. How will that all work?

Lord Freud: That is a matter that we will look at very closely. We want to encourage work and one of the main aspects of universal credit is to encourage smaller amounts of work. We will look at that issue very precisely.

Lord McKenzie of Luton: In which case, I have one final question. In relation to homelessness, I asked whether we might have a detailed note setting out all the obligations of local authorities when people present as homeless or when they are evicted.

Lord Freud: I will be happy to do that.

Baroness Hollis of Heigham: Will the Minister ensure that his colleagues in the DCLG do not give guidance to local authorities that anyone unable to pay their rent by virtue of these changes is therefore deemed intentionally homeless? That is absolutely key.

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Lord Freud: As I said, we are working very closely with the DCLG on the implementation of the benefit cap. We will work through those issues in detail.

Baroness Hollis of Heigham: When may we know the answer to that point? Conventionally, under homelessness legislation, anyone who loses their home by virtue of a failure to pay their rent is regarded as intentionally homeless. If they have children, they may get some help on grounds of vulnerability and the local authority may temporarily rehouse them. However, in future the local authority has only to give them guidance into the private rented sector, where they will be stuck. It is not a casual question. Unless we redefine the homelessness legislation from 1972 onwards, these families will be crucified.

Lord Freud: It is for local authorities to make decisions on individual homelessness applications, as they do now. Under homelessness legislation, if the only reason for the person's homelessness is a reduction in benefit that is outside their control, they should not be considered intentionally homeless by their local authority.

The Lord Bishop of Ripon and Leeds: Perhaps I may just thank everyone for all the contributions that have been made. I also thank the Minister for his engagement with the collection of questions that have been asked of him over the past half-hour or so. I retain considerable disappointment in terms of moving forward in this area. There is clearly considerable disquiet among your Lordships over how this is developing. We have not yet pursued far enough issues such as the couple penalty, which the noble Baroness, Lady Tyler, spoke about. We have been exploring homelessness but have not got all that far. It might grow as a result of the cap. The noble Lord, Lord German, and others made points about children. I do not detect any likelihood that the amendment will be accepted unanimously by this Committee but it is with considerable reluctance that I withdraw it. I know that a number of these debates will need to go on behind the scenes if we are not to have the debate all over again on Report. I beg leave to withdraw the amendment.

Amendment 99ZA withdrawn.

Lord De Mauley: My Lords, may I suggest that this would be an appropriate moment to take a 10-minute break?

5.59 pm

Sitting suspended.

6.10 pm

The Lord Bishop of Ripon and Leeds: My Lords, the amendment seeks to remove child benefit from the calculation of benefit income when determining the cap. We had a bit of discussion about that in the previous grouping. The argument for this is really quite straightforward: child benefit is a non-means-tested benefit paid to all families, working or non-working. It is not at all an employment benefit and has no effect on whether a person would be better off in work than out of work. It is far better to regard it as a grant to children. It represents the most effective way in which we as a society invest in the next generation, or the next but one.

It is manifestly unfair if child benefit is to be counted as income for non-working families but not counted as income for working families, because there we have talked about earnings. I hope that we can simply remove it from the calculations. If we do, that will release perhaps another 20,000 children from poverty. That discussion has taken place already. We have heard that 99 per cent of families with children claim this benefit, but I do not see what that has to do with the present discussions or with any of the Government's purposes in establishing the cap. If I am wrong about that, no doubt the Minister will tell me, as well as telling me what effect it can have.

The group also includes Amendment 99C, a compendium amendment to which the noble Baronesses, Lady Taylor and Lady Hayter, and the noble Lord, Lord McKenzie, have added their names. It seeks to put a number of exemptions in the Bill so that they are not subject to the whims of future Secretaries of State. As I understand it, there has been movement by the Government to exempt people in three groups: those in work, those with disability living allowance and widows. What I seek here is simply to get those exemptions into the Bill, and others will speak about them in particular.

Those who have recently left employment-one of the other groups mentioned-are vulnerable, particularly if their leaving employment is the result of developing a disability, and earlier we had a discussion about just how the transitional arrangements work. They are still going to have to wait for six months before qualifying for personal independence payments. To go back to something that the noble Lord, Lord German, was saying, giving people time to find another job is likely to help to keep them in touch with the labour market. Much the same goes for those who are unable to make work pay, which is particularly the case where childcare costs are very high. A small but very vulnerable group of families will be unable to escape poverty by moving into work but they will face poverty through the cuts if they remain unemployed.

The exemption of lone parents with children under five is particularly important. The current system and all our arguments and discussions recognise that those additional commitments make it hard for them to move into work and, indeed, recognise that they are not expected to seek work, which also goes back to the Government's purpose in having the cap. If they are not expected to seek work-and I absolutely agree with the argument that lone parents with children aged under five should not be expected to seek work-it

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seems unreasonable to place a cap on the benefits that they should receive when we acknowledge that they should not be put under pressure to seek work.

6.15 pm

However, perhaps my greatest concern of all in this group relates to carers, particularly kin carers. Other noble Lords will speak to their amendments, seeking to protect those who take on this very demanding role. It is often true that family and friends or kinship carers live in large households as a result of taking on children whose parents have died. They are in particular difficulty and often face a particularly tragic situation. Some 60 per cent of those who take on other people's children in this way, as kin carers, give up jobs in order to do so. They are often advised to do so. To impose a cap in those circumstances seems entirely inappropriate.

These amendments continue to explore that protection of children to which we all aspire and which we have been discussing for the past hour or so. I hope that we in this Committee can do something to achieve this. I beg to move.

Baroness Lister of Burtersett: My Lords, I rise to speak in support of Amendment 99AD and to oppose the questions that Clauses 93 and 94 stand part of the Bill. I want to make clear that I also support other amendments, both the more ambitious and the more limited ones. I see Amendment 99AD as something of a bottom line, particularly its exclusion of child benefit from the cap. However, first I shall say a few words about why Clause 93 should not stand part of the Bill.

Unlike some other noble Lords who have spoken, I do not support the principle of the benefit cap. Despite ministerial invocations of fairness, it is unfair. It deliberately reduces the amount of money that some families will receive to well below the amount that Parliament has determined is the minimum that is required to meet their needs-a minimum that is itself well below minimum income standards, as we discussed earlier in our proceedings. We have heard that the average loss will be £93. Nearly half the families affected will lose between £50 and £150, and 15 per cent will lose more than £150. Black and minority ethnic families will be disproportionately affected. It simply is not good enough for Ministers to say, as they have, that the state can no longer afford to pay this minimum. We are a rich society despite current economic difficulties. What the state can afford to pay is a matter of political choice.

In applying such a cap, the Government are arguably reducing income to below what constitute decency levels in a modern, industrialised society-below the level required to ensure human dignity. Therefore, it does not surprise me that legal advice received by the Equality and Human Rights Commission stated that,

"there must be a real concern ... that the cap on benefits, which will disproportionately impact on larger families",

will result in a violation of the Human Rights Act. Some of the likely consequences have already been spelt out by other noble Lords. My noble friend Lord McKenzie has already cited the Centre for Social Justice, which warned that the impact was "likely to be devastating" for some families, so how can this be justified?

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The justification put forward by Ministers is another example of how the Bill is designed to try to influence behaviour and send out signals-so many signals that we should nickname this the "semaphore Bill". Once again, the spectre of welfare dependency raises its head and people are to be incentivised to find work, although I thought that the main point of universal credit was to do just this, insofar as incentives are inadequate at present.

We have already heard how the incentives argument is not that convincing. As my noble friend Lord McKenzie has already observed, some groups affected by the cap are not expected to seek work-the right reverend Prelate the Bishop of Ripon and Leeds made this point-such as carers and lone parents of children aged under five. I was disappointed that the Minister could not explain to the Committee what behavioural effects the Government were trying to achieve in the case of those who are not expected to seek work. I hope that, having had more time to think about this, he might be able to do so when he speaks.

Could the Minister also address the issue that I raised at the last sitting, which the right reverend Prelate has also raised, about impact of the six-month qualifying period for PIP? How many are likely to be affected, and would it be possible to backdate the money that they lose as a result of the cap, when they then become eligible? It should also be noted that, to the extent that fewer people qualify for PIP than for DLA, so will fewer disabled people be exempt from the cap.

As has already been noted, the cap will also apply to some who are in paid work. Again, I was disappointed that the Minister could not explain at this stage how it is planned to determine at what point those in paid work will be free of the cap under universal credit. It is a very important question. As was pointed out in CPAG's Welfare Rights Bulletin, the danger is that a threshold is created that people in low-paid work could frequently cross, resulting in wild fluctuations in their entitlement and complex better-off calculations. A small drop in earnings over which the claimant might have no control could leave to a massive drop in income if the cap is triggered.

Ferret Information Systems comments that the cap will create just the kind of cliff edge that universal credit was intended to remove. It gives an example of how a difference of 1p an hour for someone working 24 hours at the minimum wage level could generate a net income increase or loss of £98.23. This is surely nonsensical. The greater security of income promised with universal credit would be undermined if people on very low earnings are living in constant fear of the cap being triggered.

I am also unclear as to how work incentives are promoted if, as predicted, one effect of the cap is that families have to move house to find cheaper accommodation, which we have already talked about and could be difficult, given that a majority of those affected-although perhaps not quite as big a majority as originally thought-will be in social housing. Is there not a danger that in search of affordable accommodation they will end up moving to an area where job opportunities are even poorer?

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At Second Reading and in response to previous amendments, the Minister argued that:

"The introduction of a benefit cap will mean that households on out-of-work benefits will have to make the same decisions as families in work with regard to the lives they lead and the areas they can live in".-[Official Report, 13/9/11; col. 739.]

It is still unclear to me, having listened to everything that the Minister said earlier and the debate so far, what decisions people are supposed to take if they cannot find work or affordable housing. The answer is that they simply have to live below the level set by Parliament. In response to a Written Answer about the implications for homelessness, the Minister said that if they became at risk of homelessness then our old friend, the loaves and fishes of the discretionary housing payment, would come to the rescue.

For lone parents in particular, the loss of social networks that can help with childcare could serve to make it harder for them to enter into paid work if they have to move area. The loss of such networks surely goes against the aspirations of the big society. Moreover, as the noble Baroness, Lady Tyler of Enfield, and my noble friend Lord McKenzie have already said, the cap will create a significant new couple penalty. So it is difficult to square the cap with key elements of the Government's own philosophy.

The Minister of State told the Public Bill Committee in the other place that the clause is not primarily a "cost-saving measure". Instead, he claimed that,

"fundamentally it is about creating a more credible welfare system ... We do not believe that it is reasonable or fair that households getting out-of-work benefits should receive a greater income from benefits than the average weekly net wage for working households. That is the core principle that we are seeking to put in place here".-[Official Report, Commons, Welfare Reform Bill Committee, 17/5/11; col. 985.]

We have heard that again from the Minister this evening. Is it not the case that the Government themselves are undermining the credibility of the so-called welfare system by sending out a signal that people on average wages are receiving significantly less money than some people on benefits, when the proposition is based on the false assumption that people on average-or, more accurately, median-wages are not themselves receiving welfare in various forms? That this is the case is demonstrated by parliamentary Answers, which show that, if the benefits and tax credits received by working families on median earnings were taken into account, hardly any of them would be worse off than out-of-work families. The Government could do much more for the credibility of the system if it sent out more accurate signals.

This brings me to Amendment 99AD, which is about protecting children, who are the main victims of the cap, as other noble Lords have underlined. They are victims who cannot respond to the Bill's signals. I am grateful to Barnardo's for circulating a briefing in support of the amendment. It is designed in particular to stop the cap penalising larger families-thereby failing the Prime Minister's family test-and to create the level playing field that the Minister of State claimed for the cap in the other place. We have already heard-and

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I apologise for repeating it, but it seems like the message needs repeating because it has not been heard loud and clear by some members of the Committee-that one important reason why the playing field is far from level is that child credit and child tax credit received by families of median earnings are not included in the income level at which the cap is set, but are included in the out-of-work income to be taken into account. I could not believe it at first when I discovered that child benefit is being treated in this way, because it is so patently unjust. As I said earlier, take-up of child benefit is virtually 100 per cent, so there is not an issue as to whether families with median earnings are or are not getting it. They are getting exactly the same amount as families out of work: it just depends on the size of the family.

According to a Written Answer, the median level of child benefit received by families with median earnings is estimated to be £33.70 a week. If the child benefit of out-of-work families were ignored when applying the cap-and this is also the purpose of the amendment moved by the right reverend prelate the Bishop of Ripon and Leeds-it would reduce the numbers affected by 40 to 50 per cent. This would reduce the savings from £270 million to £140 million in 2014-15. Therefore, nearly half the savings from the cap are being made on the basis of a blatant piece of unfairness which drives a coach and horses through the Government's claim to be creating a level playing field between those in and out of work. Given that the Minister of State has said that it is not primarily a cost-saving measure, I hope that the Minister will not use the cost as an argument for rejecting the amendment.

The amendment would also exclude childcare costs. If I understood the Minister correctly, he has told the Committee that those costs will not be treated as income for someone out of work. That is correct, so we have that again clearly on the record. I very much welcome that, because previously it had been suggested that they would be. That is an important step; it would have been nonsensical had it been, so perhaps we have achieved something here today.

I oppose the cap in principle, and would support more ambitious amendments than the one in my name and the names of the noble Lords, Lord Kirkwood of Kirkhope and Lord Adebowale. As I said, I particularly see the exclusion of child benefit from the income taken into account in applying the cap as a bottom line below which the Government's claim to fairness is so patently unfounded that they should be embarrassed even to try to justify its inclusion. In the Public Bill Committee in the other place, the Minister of State had no real answer to this and kept evading the question of child benefit received by working families. I would therefore be grateful in the Minister could explain to your Lordships how in fact the Government justify the inclusion of child benefit in the cap when it is not included in the comparator incomes of working families. Better still-given that, according to the Minister of State, the cap is not primarily a cost-saving measure but purports to be about fairness, and given the strength of the opposition which we have already heard-I hope the Government will think again.

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6.30 pm

Baroness Donaghy: My Lords, Amendment 99ZC is by way of an interval in the big picture, but I hope that noble Lords will not go out and get an ice-cream while I am speaking.

This is a probing amendment to ensure that industrial injuries disablement benefit is not counted towards the benefit cap. At present, industrial injuries will be among the benefits that count towards total benefit income for benefit cap purposes. The Government have indicated that the constant attendance allowance under the industrial injuries scheme will be exempted in the same way as disability living allowance, and I shall say a little more about constant attendance allowance later.

Benefits under the industrial injuries scheme are different in character from the rest of the benefits system. Whereas other benefits are designed to prevent or ameliorate poverty, to help people to cope with extra costs or to substitute for lost income, the industrial injuries scheme is a system of no-fault compensation. In November last year, the Industrial Injuries Advisory Council wrote to the Minister to argue that IIDB should not count towards the cap for just this reason.

Employers and unions both support the industrial injuries scheme, which eliminates the need for an adversarial approach to compensating for a large number of injuries and diseases that are agreed to be a risk to employment. Damages won through civil litigation are a closer parallel to the industrial injuries scheme than disability or other benefits. Including damages awarded by the courts in the total that is subject to the cap would plainly be unfair, but industrial injuries disablement benefit is also a form of compensation and including it is just as unfair. Payments under the vaccine damages payment scheme are not to count towards the cap but they, too, are a form of compensation.

On 10 November in this Committee, my noble friend Lady Hayter took the opportunity to raise a number of questions and she put the issue very well. She said,

"it seems that to include these payments, which are compensation for injuries at work, within a calculation of the total support that a family could receive from the state would be somewhat unfair. It would mean that for a young person living with their family, any such support would be taken away from the total family entitlement, which would effectively turn the benefit into a means-tested benefit".

The Minister replied:

"We can discuss that entire area when we look at the whole range of benefits". -[Official Report, 10/11/11; col.112.]

Well, my Lords, the time is now.

The Government have put forward three reasons for introducing the benefit cap. All these reasons are weak when one looks at the industrial injuries disablement benefit. The Government have said that they are introducing the benefit cap partly to reduce benefit expenditure but IIDB accounts for a very small amount of social security expenditure. It stood at 0.58 per cent of DWP annually managed expenditure in 2010-11. However, IIDB will account for an even smaller proportion of benefit cap savings, most of which will affect large, younger families, especially those in receipt of housing benefit. Claimants of benefits from the industrial injuries

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scheme tend to be older-50.9 per cent of expenditure is on people who are over pension age-and will therefore count for significantly less than the 0.58 per cent. It is unlikely that counting IIDB towards the benefit cap would save as much as £1 million a year, but I appreciate that I am really talking about an issue of principle here and not just expenditure.

The Government's equality impact assessment also indicated that a further purpose is to improve working incentives for those on benefits. It must be emphasised that IIDB does not create a work disincentive. Half of all spending on it is accounted for by pensioners, and working-age claimants can continue to receive the benefit if they stay in work or find work.

Ministers have given great prominence to the argument that it is not fair for a workless family to receive more in benefits than an average family would receive in wages. In last year's spending review, the Treasury listed the benefit cap under the heading of "Fairness ... Reducing the deficit fairly while protecting the vulnerable". However, a working family, one of whose members has suffered an industrial disease or injury, would not be in a worse position than a workless family. They would have the same right to IIDB.

The Government have not said a great deal about why it should count towards the cap. The Minister has made a distinction between recipients of disability living allowance and IIDB claimants. People do not get industrial injuries benefit to meet extra costs, which can be dealt with by an award of DLA if necessary, and the Minister has used this difference to justify excluding DLA but not IIDB. This argument is not a sufficient rebuttal because it fails to address the point that I made about the nature of the industrial injuries scheme. Furthermore, if having extra costs were to be the reason for excluding the benefit, how would we explain the decision to exclude retirement pension and pension credit?

Informally, officials sometimes argue that excluding IIDB would open the floodgates for a long list of special cases, which would complicate the benefit cap. I hope that tidiness is never the deciding factor in matters like this and that simplicity is not a sufficient reason for proceeding with an unfair change.

The Government's decision to exclude constant attendance allowance is of course welcome. It is worth remembering, however, that this is one of the industrial injury scheme benefits abolished by the previous Conservative Government and there are now comparatively few claimants. In fact, the cost of the constant attendance allowance is just 1 per cent of the industrial injuries scheme. I hope that the Government will agree with me that the industrial injuries disablement benefit should not be counted towards the benefit cap.

Baroness Hollins: My Lords, Amendment 99A calls for a new exemption from the benefit cap for households in which a resident claims carers' allowance and for carers in receipt of the additional amount in universal credit for those with caring responsibilities. I am grateful to my noble friend Lady Meacher, the noble Baroness, Lady Hayter, and the noble Lord, Lord McKenzie, who have added their names to the amendment.

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Why is it wrong to cap carers' benefits? Carers UK and the Disability Benefits Consortium, representing more than 50 disability charities, are concerned that, as it stands, a cap could be devastating for some carers. It would also send out an extremely negative message about how the Government value family care and risk the perverse outcomes of disincentivising family care and potentially making caring for older or disabled relatives financially untenable for some families.

Carers make a huge contribution to society, estimated this year by Carers UK and the University of Leeds to be £119 billion each year. From the Minister's response to an earlier amendment, we know how much the Government value that contribution. However, that only emphasises the fundamental unfairness of including carers' allowance within this cap. This is perhaps best illustrated by the justification given by the Secretary of State for Work and Pensions when he introduced the Bill in the Commons, stating that the benefit cap was,

"a matter of fairness, so that those who are working hard and paying their taxes do not feel that someone else will benefit more by not playing a full part in society".-[Official Report, Commons, 9/3/11; col. 922.]

If this cap is designed to be fair to individuals who are working hard and playing a full part in society, then it cannot be right that it applies to carers.

In order to receive their benefit, carers must be caring for a minimum of 35 hours a week-the equivalent of a full working week. Many care around the clock, with NHS Information Centre figures showing that a fifth of carers are caring for more than 50 hours a week. It would not be possible to say that these individuals are not working hard. Nor could it be said that they are not contributing to society, as they represent so many of the social values that the Government are working to promote in this Bill and beyond-strong families and communities, and taking personal responsibility. Indeed, such carers are not required to seek work and conditionality does not apply to them.

However, there are some inconsistencies in the existing proposals. While the Government have stated that the exemption for DLA protects families affected by disability, this is not the case for all such families. A lot depends on the definition of the word "household". The DLA exemption protects households that include a DLA claimant, but what is considered to be a household in universal credit includes children under 18 and partners but not adult children or other adult relatives. Therefore, while carers looking after disabled partners and disabled young children would be exempt from the cap, those caring for adult disabled children or elderly parents or disabled siblings would not be exempt. Families caring for disabled children under 18 would therefore be exempt from the cap, but those caring for adult disabled children would be subject to it because the DLA claimant, as an adult, would no longer be considered to live in the same benefits household, even if they were living together.

Let me give an example of a family who would be affected. Imagine a single father with three sons, the eldest of whom is 19, has learning disabilities and a variety of other health conditions. The father has two other children of school age. While his eldest son receives DLA and he himself gets carers' allowance for

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supporting him full-time, the father's benefits, including child benefit and housing benefit, would be capped because his adult son would not be considered to be in the same benefits household as his father, despite living with him. The financial impact of the cap could be significant. With local housing allowance and council tax benefit totalling £305.22, income support £42.95, child tax credit £108.75, child benefit £33.70 and carers' allowance £55.55, he would be in receipt of £546.17 a week. A cap of the level announced by the Government would result in a loss of £46 a week or £184 a month.

Such a drop in income could force carers such as this father to stop caring and instead turn to social services to provide full-time care for his son because he feels that he has no choice but to look for paid work rather than be a full time carer-a distressing situation for the family and ultimately far more costly to the state. According to Carers UK, to which I am grateful to for providing me with an excellent briefing for today, carers giving up work in order to care lose an average of £11,000 a year.

This kind of situation is neither logical nor fair. The best way to ensure that the carer's contribution is better recognised and rewarded, and that carers are not penalised for taking on caring responsibilities, would be to give carers exemption from this cap. I ask the Minister: why is carers' allowance included in the benefit cap when the Government's intention is to protect those affected by disability? Or is it simply a mistake?

6.45 pm

Lord Best: My Lords, I am speaking to Amendments 99AA, 99AB and 99D. We now return to housing matters. I have already made the point that it is high housing costs that so often will push families over the cap. High housing costs do not of course equate to housing quality. A £350-a-week two-bedroom flat in outer London can be to far lower standards than an £85-a-week three-bedroom council house with a garden in the north-east, yet the outer London family in Newham has only £150 left within the £500 cap after paying their rent while the well housed family in the north-east has £415 left to meet other needs. I have argued for the housing cost element in the benefits received to be taken out of the equation to create greater fairness. That change would render several of my amendments in this group redundant, but I turn to them none the less.

Amendment 99A calls for a period of grace for those affected by the new cap during which the claimant would remain entitled to full benefits. Only after this period-my amendment suggests 26 weeks-would the total benefit cap be applied. Without this concession, many families in private rented accommodation in the south of England will see the benefits for their housing costs cut, forcing them to look immediately for alternative housing elsewhere. Current housing benefit regulations allow for a 13-week period of grace from restrictions on the rent that they have been paying independently up to that point, so the claimant who could afford to pay the rent until they lost their job will get that rent covered in full for 13 weeks even if it breaches the maximum levels of local housing allowance. A longer

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period is allowed for households that have suffered bereavement. For them there is a 52-week period of grace. It seems entirely right that a proper safety net should be available to a family that faces a sudden change in circumstance to give them a chance to get back on their feet.

It is generally agreed that an important function of the benefits system is to provide such a full safety net for those suddenly hit by redundancy or relationship breakdown. If, from the very day that such a drastic change of circumstances has struck, the family has a substantial shortfall to find between their benefit for housing costs and the rent that they must pay, then a major setback becomes a real crisis. How much better to give the household some weeks to secure a new job, or indeed to move home without having to present themselves as homeless. How much more cost-effective to give people the opportunity to get back into work rather than having to move the family to another area where rents are lower and jobs likely to be scarcer, all the while accumulating rent arrears and seeing the chances of a settled life with a proper job taken from them.

If they are going to have to move to a cheaper part of the country, at least they must have time to make all those arrangements and, hopefully, secure employment in the new place. We all know that the cap is intended to reinforce the message that work pays and a life on benefits is not sustainable, but it will affect newly unemployed households that have a strong desire to work but have lost their jobs because of factors outside their control. Rather than penalise people who are doing all they can to make a swift return to employment, the arrangements should see people through a difficult period so that they can re-establish themselves for the long term.

Where relationship breakdown and the loss or desertion of the main breadwinner is the trigger for the benefit entitlement that is now to be capped-the DWP's impact assessment shows that more than half the households affected by the cap are likely to be headed by lone parents-a precipitous application of the new limit seems likely to lead simply to homelessness. This compounds the harm and distress experienced by the children. Surely it makes more sense to allow those lone parents to look for a suitable job following separation, make arrangements for childcare-so often relying on grandparents, who themselves will need to make new arrangements-and get back on their feet in a sensible way, and to ensure that for the children the loss of a parent is not followed by the loss of a home.

At the same time, a breathing space allows those responsible for paying benefits to untangle the complexities, calculate entitlements in relation to tax credits and other exemptions and handle the administration. With local authorities continuing to look after housing benefit during the interim period before the universal credit arrives-at least six months-there is already enough opportunity for delay in handling these claims. The period of grace would help those paying the benefits as well as those receiving them. I am confident that the Minister will be able to respond positively on this one, as it seems in no one's interests to deny families the breathing space in receiving the

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benefits that sees them through a bad patch, rather than forcing themselves into a crisis-into homelessness and, in all likelihood, into long-term worklessness.

My second amendment in this group, Amendment 99AB, seeks to exempt homeless households in temporary accommodation from the overall benefit cap. Again, this would be redundant if my earlier amendment to exempt all housing benefit from the cap was accepted. It is therefore a fallback amendment. It seems anomalous for those placed by their local authority in temporary accommodation, quite often outside their own borough and already in the cheapest neighbourhoods, to be penalised for paying too much for their housing. Such households have no choice over the accommodation that they occupy and therefore cannot seek to reduce their housing costs or cut their cloth to suit their means. Local authorities are already restricted in their choice of where they can put those deemed to be homeless by restrictions on the housing benefit payable for temporary accommodation. The housing benefit subsidy will not cover more than the local housing allowance, less 10 per cent, using the previous marker of the 50th percentile. Councils then charge an administrative fee of £40 a week in London or £60 elsewhere, which is added to the household's housing benefit claim. The total rent payable in relation to the homeless household will be higher for temporary accommodation of this kind and therefore, alongside the family's ordinary benefits, is more likely to take them over the proposed total housing benefit cap.

An additional complication is that at present the Government's Homelessness Code of Guidance for Local Authorities prevents councils from arguing that a homeless household should use other benefits to top up the payment for their rent. This is an understandable restriction, since the state believes that the income of families for their subsistence living should not be reduced below a minimum level. This means, perfectly reasonably, that councils securing accommodation in the private rented sector for workless homeless families cannot turn to the families themselves to meet any part of the rental shortfall caused by the extra cap.

Already inner London authorities such as Westminster City Council are exporting homeless households to outer London boroughs. They will have to work within tougher constraints in future, but it is hard to see the sense of placing an overall benefit cap that reduces the benefit for housing costs for these homeless families. They are already being moved away from support networks-friends, grandparents et cetera-and penalising the family by cutting their income to the point when they cannot afford the accommodation to which they have been sent would seem to place both them and the council that sent them in an impossible position.

Is the idea that the local authority, having accepted responsibility for the homeless household, will be expected to support the family financially to stay in the temporary accommodation to which they have been sent? While such an arrangement would enable the family to remain there, the extra costs falling on the local authority would seem a very unfair transfer from the DWP to local councils. Or is the intention that the local authority

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must make arrangements to ship homeless families still further away, with all the logistical problems that implies?